What is the standard 97 loan program?
The Conventional 97 program enables property buyers to get a traditional mortgage loan with only 3% down.
The program is named for the 97% of the home value that is funded by the lending institution after the buyer makes a 3% down payment.
The loan program can fund a single-family home or apartment unit - as long as the purchaser plans to use the home as a primary residence.
Conventional 97 uses an alternative to FHA loans, which require a comparable 3.5% down payment.
In this article:
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 Standard 97 Loan
2025 traditional 97 guidelines
Aside from needing just 3% down, Conventional 97 loans work a lot like other standard mortgage loans.
But this loan program works just for novice home buyers - specified as buyers who have not owned a home in the past 3 years. For borrowers looking for a low deposit mortgage, it can be an excellent mortgage option.
Here are some other Conventional 97 loan qualifications:
- The loan must be a fixed-rate mortgage
- The residential or commercial property needs to be a one-unit single-family home, co-op, PUD, or condominium
- A minimum of one buyer should not have owned a home in the last three years
- The residential or commercial property must be the owner's primary residence
- At least one customer needs to take a property buyer education course
- The loan quantity must be at or below $806,500
These functions align well with the typical novice homebuyer's profile.
For example, most purchasers today are looking for a one-unit home - as opposed to a duplex or triplex - or a condominium that they plan to reside in as their primary house. First-time purchasers are likewise likely to be seeking something with a lower purchase rate.
Today's typical home price is around $350,000 according to the National Association of Realtors, putting a Standard 97's average deposit at $10,500 - within reach for many home shoppers.
By contrast, making a 20% down payment would need $70,000 upfront.
Check your eligibility for the traditional 97% LTV program. Start here (Aug 20th, 2025)
Conventional 97 credit requirements
Many homebuyers presume they require impeccable credit report to qualify for a loan that needs only 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 certify 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 safeguard the lending institution in case you default.
This extra layer of security for the lending institution makes it possible for the lending institution to use 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 savings on interest for brand-new house owners.
Yes, personal mortgage insurance coverage would make the 3% down option more pricey on a month-to-month basis, in the beginning.
But the borrower's down payment requirement is substantially lower, enabling 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 worth. 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 immediately drops off.
Conventional 97 rate of interest
Mortgage rates for the 3% down payment program are based on standard Fannie Mae rates, plus a small rate increase.
However, this fee or rate boost is typically minimal compared to the value included from earlier home buying.
Someone purchasing a $300,000 home would pay about $80 more each month by choosing the 97% loan alternative compared to a 5% down loan.
Yet, the buyer minimizes their overall in advance home buying expenses by over $5,000.
The time it requires to save an extra 2% deposit could indicate greater real estate costs and tougher certifying down the roadway. For lots of purchasers, it might prove more affordable and quicker to choose the 3% down mortgage instantly.
Low down payment options to Conventional 97 loans
Conventional 97 loans vs FHA loans
Before Fannie Mae introduced 3% down payment standard loans, more home buyers who required a low down payment loan picked 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 a lot of new home purchasers, putting an FHA deposit in the neighborhood of a Conventional 97's.
But unlike standard loans, FHA loans enable credit history below 620 - and as low as 580. Plus, the FHA doesn't include Loan Level Price Adjustments like traditional loans.
So, if your credit is borderline - simply barely sufficient to receive 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) will not go away unless you put 10% or more down. You'll keep paying the annual premiums up until you settle the loan or refinance.
The FHA likewise charges an upfront mortgage insurance coverage premium. This one-time, upfront cost amounts to 1.75% of the loan quantity for the majority of borrowers.
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 without any cash down.
Unlike FHA and traditional 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. Along with putting no money down, VA borrowers will not pay yearly mortgage insurance - simply an upfront funding charge.
Zero-down USDA loans work in rural and rural areas and just for customers who make less than 115% of their area's median earnings. They likewise need a greater credit score - usually 640 or greater.
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 talking about Fannie's standard 3% down mortgage.
But some customers may choose:
Fannie Mae's HomeReady: This 3% down loan is developed for moderate-income customers. If you earn less than 80% of your area's median earnings, you may get approved for HomeReady. What's so good about HomeReady? In addition to low down payments, 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 includes the capability to utilize sweat equity towards the down payment. This can get complicated, and you 'd require the seller's approval ahead of time. 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 limits to stress over.
Your loan officer can help identify the low down payment loan that works best for you.
Check your eligibility for a 3% deposit conventional mortgage. Start here (Aug 20th, 2025)
97% LTV Home Purchase FAQ
What is a Conventional 97 loan?
A Standard 97 is a standard mortgage that requires just 3% down. It's named for the staying 97% of the home's worth that the mortgage will finance.
How do you get approved for Conventional 97?
Qualifying for a Conventional 97 loan requires a credit rating of at least 620 for the most part. Debt-to-income ratio (DTI) ought to likewise fall below 43%. There are no income limitations. Borrowers who currently own a home or who have actually owned a home in the previous 3 years will not qualify.
Do all lenders use Conventional 97?
Most lenders use Conventional 97 loans. This item complies with Fannie Mae's rules. Lenders that offer Fannie Mae loans will likely offer this 3% down product.
Can closing expenses 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 value. Rolling closing costs into the loan quantity would push the loan beyond this 97% limit. However, lots of newbie property buyers certify for down payment and closing cost assistance grants and loans. Conventional 97 likewise enables gift funds. This means member of the family or good friends could help you cover closing expenses.
Who provides Conventional 97 loans?
Most personal mortgage lenders - whether they're online, downtown, or in your area - offer Fannie Mae traditional loans which consist of Conventional 97 loans.
Is there a minimum credit history for the 3% down payment program?
Borrowers need a credit rating of at least 620 to get any Fannie Mae-backed loan. The exception would be those with non-traditional credit who have no credit score. Mortgage loan providers can set their minimum credit rating greater than 620. Some may need 640 or 660, for example. Make sure to talk to your mortgage loan provider to learn for sure.
Can I utilize down payment gift funds?
Yes. Fannie Mae states present funds might be used for the deposit and closing costs. Fannie does not set a minimum out-of-pocket requirement for the buyer. You may likewise get approved for down payment support. Your mortgage officer can assist you discover programs in your state.
Can I buy a condo or townhouse?
Yes. Buyers can purchase a condo, townhome, 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 2nd home or financial investment residential or commercial property?
No. The 97% loan program might be used just for the purchase of a primary house.
I owned a home 2 years ago however have actually been leasing considering that. Will I qualify?
Not yet. You must wait up until 3 years have passed given that you had any ownership in a house. At that point, you are thought about a first-time home buyer and will be eligible to get a Standard 97 loan.
Will mortgage insurance coverage companies provide PMI for the 97% LTV mortgage?
Yes. Mortgage insurers are on board with the program. You do not have to discover a PMI business since your loan provider will buy mortgage insurance for you.
How much is mortgage insurance?
Mortgage insurance coverage varies commonly based on credit report, from $75 to $125 per $100,000 borrowed, monthly.
Can I get an adhering jumbo loan with 3% down?
No. This program won't let lending institutions surpass adhering loan limits. At this time, high balance, also called conforming jumbo loans - those over $806,500 - are not eligible.
I'm currently authorized putting 5% down, but I wish to make a 3% deposit instead. Can I do that?
Yes. Even if you've currently been through the underwriting procedure, your loan provider can re-underwrite your loan if it provides the Conventional 97 program. Keep in mind your debt-to-income ratio will increase 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 general profile consisting of credit report identifies your DTI maximum. While there's no mandatory number, many lending institutions set a maximum DTI at 43%. This means that your future principal, interest, tax, insurance coverage, and HOA fees plus all other regular monthly financial obligation payments (student loans, credit card minimum payments) can be no more than about 43% of your gross earnings.
Can I utilize the 3% down program to re-finance?
Yes. If you have an existing Fannie Mae loan, you may be able to re-finance up to 97% of the existing value. Refinancing may permit debtors to decrease their regular monthly payments or get rid of mortgage insurance premiums.
Click here for more details about the 97% LTV re-finance program.
Why is the program just for newbie home buyers?
Fannie Mae's research study uncovered that the biggest barrier to homeownership for first-time homebuyers was the down payment requirement. To stimulate more people to purchase their very first home, the minimum down payment was reduced.
Are there earnings limits?
The standard 3% down program does not set limits on your earnings. However, the HomeReady 97% loan does need the customer to be at or listed below 80% of the location's mean earnings.
What is a HomeReady mortgage?
HomeReady is another program that requires 3% down. It has versatilities integrated, such as utilizing earnings from non-borrowing home members to certify.
To see if you receive 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 versatilities integrated, such as using earnings from non-borrowing household members to qualify.
How to get a traditional 97 loan
The Conventional 97 mortgage program is readily available instantly from lenders throughout the nation. Talk with your lenders about the loan requirements today.
