What is the standard 97 loan program?

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

The program is called for the 97% of the home worth that is financed by the lending institution after the purchaser makes a 3% deposit.

The loan program can finance a single-family home or condo unit - as long as the buyer prepares to utilize the home as a primary home.

Conventional 97 provides an alternative to FHA loans, which need 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 standards

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

But this loan program works just for novice home purchasers - defined as purchasers who haven't owned a home in the previous three years. For borrowers trying to find a low deposit mortgage, it can be a good mortgage alternative.

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 apartment
• A minimum of one purchaser must not have owned a home in the last three years
• The residential or commercial property should be the owner's primary house
• A minimum of one debtor must take a property buyer education course
• The loan quantity should be at or below $806,500
  
  These functions line up well with the normal first-time property buyer's profile.
  
  For circumstances, a lot of purchasers today are looking for a one-unit home - as opposed to a duplex or triplex - or a condominium that they plan to live in as their primary home. First-time purchasers are likewise most likely to be looking for something with a lower purchase price.
  
  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 lots of home consumers.
  
  By contrast, making a 20% down payment would need $70,000 upfront.
  
  Check your eligibility for the conventional 97% LTV program. Start here (Aug 20th, 2025)
  
  Conventional 97 credit requirements
  
  Many homebuyers presume they require remarkable credit history 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 rating as low as 620 and still receive a 3% down loan.
  
  How is this possible? Private mortgage insurance, or PMI, is one reason. When you put less than 20% down, you'll pay these premiums which secure the lender in case you default.
  
  This additional layer of defense for the loan provider enables the loan provider 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 unlock years of savings on interest for new property owners.
  
  Yes, private mortgage insurance would make the 3% down option more pricey on a monthly basis, in the beginning.
  
  But the debtor's deposit requirement is considerably lower, enabling them to purchase a home much earlier - before home costs increase again.
  
  And remember, you can cancel PMI when the loan's balance reaches 80% of the home's worth. Lenders call this percentage your loan-to-value ratio, or LTV.
  
  When LTV is up to 78% of the residential or commercial property's worth, PMI instantly drops off.
  
  Conventional 97 interest rates
  
  Mortgage rates for the 3% deposit program are based upon basic Fannie Mae rates, plus a small rate increase.
  
  However, this cost or rate increase is typically very little compared to the worth included from earlier home purchasing.
  
  Someone purchasing a $300,000 home would pay about $80 more per month by choosing the 97% loan option compared to a 5% down loan.
  
  Yet, the buyer reduces their overall in advance home buying expenses by over $5,000.
  
  The time it requires to save an extra 2% deposit might mean greater genuine estate rates and harder certifying down the road. For many purchasers, it could show more affordable and quicker to opt for the 3% down mortgage immediately.
  
  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 required a low deposit loan chose an FHA loan.
  
  FHA loans are still the finest choice for a lot of buyers. The Federal Housing Administration, which insures these loans, needs 3.5% down for a lot of new home buyers, putting an FHA deposit in the community of a Conventional 97's.
  
  But unlike traditional loans, FHA loans enable credit history listed 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 hardly great enough to certify for a Conventional 97 - you might draw a better-rate loan from the FHA.
  
  The catch is the FHA's mortgage insurance coverage. Unlike PMI on a standard mortgage, FHA mortgage insurance coverage premiums (MIP) will not disappear unless you put 10% or more down. You'll keep paying the until you settle the loan or refinance.
  
  The FHA also charges an in advance mortgage insurance coverage premium. This one-time, upfront cost totals 1.75% of the loan quantity for many 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 - use new mortgage with no cash down.
  
  Unlike FHA and traditional loans, USDA and VA loans won't work for simply any customer.
  
  VA loans go to military members or veterans. They're a perk for people who have served. And they're an appealing perk. Along with putting no cash down, VA customers will not pay yearly mortgage insurance - just an in advance financing fee.
  
  Zero-down USDA loans operate in rural and rural locations and just for customers who make less than 115% of their location's typical earnings. They also require a higher credit rating - typically 640 or greater.
  
  Conventional 97 vs other low down payment standard loans
  
  Fannie Mae and Freddie Mac provide more than one low deposit loan. So far in this post, we've been talking about Fannie's basic 3% down mortgage.
  
  But some borrowers might prefer:
  
  Fannie Mae's HomeReady: This 3% down loan is designed for moderate-income borrowers. If you earn less than 80% of your location's median earnings, you may get approved for HomeReady. What's so excellent about HomeReady? In addition to low down payments, this loan offers reduced PMI rates which can reduce your regular monthly payments Freddie Mac's Home Possible: This 3% down loan works a lot like HomeReady. It adds the capability to use sweat equity toward the down payment. This can get complicated, 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 fret about.
  
  Your loan officer can help determine the low deposit 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 conventional mortgage that requires only 3% down. It's called for the staying 97% of the home's worth that the mortgage will finance.
  
  How do you receive Conventional 97?
  
  Getting approved for a Conventional 97 loan requires a credit score of at least 620 in many cases. Debt-to-income ratio (DTI) ought to likewise fall below 43%. There are no income limits. Borrowers who currently own a home or who have owned a home in the past 3 years won't qualify.
  
  Do all lenders use Conventional 97?
  
  Most lenders use Conventional 97 loans. This product conforms to Fannie Mae's guidelines. Lenders that offer Fannie Mae loans will likely provide this 3% down product.
  
  Can closing costs be included in a standard 97 loan?
  
  No. As its name suggests, the Conventional 97 program can finance approximately 97% of a home's assessed worth. Rolling closing expenses into the loan quantity would push the loan beyond this 97% threshold. However, lots of first-time homebuyers qualify for deposit and closing expense assistance grants and loans. Conventional 97 likewise enables gift funds. This indicates family members or pals could assist you cover closing expenses.
  
  Who uses Conventional 97 loans?
  
  Most private mortgage lending institutions - whether they're online, downtown, or in your community - deal Fannie Mae traditional loans which consist of Conventional 97 loans.
  
  Exists a minimum credit history for the 3% deposit program?
  
  Borrowers require 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 history. Mortgage lenders can set their minimum credit rating greater than 620. Some might require 640 or 660, for instance. Make sure to talk to your mortgage lender to learn for sure.
  
  Can I utilize deposit present funds?
  
  Yes. Fannie Mae specifies gift funds may be utilized for the deposit and closing expenses. Fannie does not set a minimum out-of-pocket requirement for the buyer. You may also get approved for down payment help. Your mortgage officer can assist you find programs in your state.
  
  Can I buy a condominium or townhome?
  
  Yes. Buyers can buy a condominium, townhome, house, or co-op using the Conventional 97 program as long as it is only one system.
  
  Can I purchase a made home with 3% down?
  
  No. Manufactured homes are not permitted with this program.
  
  Can I purchase 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 two years ago but have been leasing considering that. Will I certify?
  
  Not yet. You need to wait until 3 years have passed because you had any ownership in a residence. At that point, you are considered a newbie home buyer and will be qualified to get a Conventional 97 loan.
  
  Will mortgage insurer supply PMI for the 97% LTV mortgage?
  
  Yes. Mortgage insurance providers are on board with the program. You do not need to find a PMI business since your lending institution will order mortgage insurance for you.
  
  Just how much is mortgage insurance coverage?
  
  Mortgage insurance coverage varies commonly based upon credit report, from $75 to $125 per $100,000 borrowed, monthly.
  
  Can I get an adhering jumbo loan with 3% down?
  
  No. This program will not let lending institutions go beyond conforming loan limitations. At this time, high balance, also referred to as adhering jumbo loans - those over $806,500 - are not eligible.
  
  I'm currently authorized putting 5% down, however I wish to make a 3% down payment instead. Can I do that?
  
  Yes. Even if you have actually currently been through the underwriting procedure, your lending institution can re-underwrite your loan if it uses the Conventional 97 program. Bear in mind your debt-to-income ratio will rise with the greater loan quantity and possibly 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 history determines your DTI optimum. While there's no mandatory number, a lot of lending institutions set an optimum DTI at 43%. This suggests that your future principal, interest, tax, insurance, and HOA charges plus all other regular monthly debt payments (trainee loans, charge card minimum payments) can be no more than about 43% of your gross income.
  
  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 current worth. Refinancing might permit borrowers to reduce their monthly payments or remove mortgage insurance premiums.
  
  Click here to learn more about the 97% LTV refinance program.
  
  Why is the program just for novice home purchasers?
  
  Fannie Mae's research uncovered that the most significant barrier to homeownership for novice homebuyers was the down payment requirement. To stimulate more individuals to buy their very first home, the minimum deposit was decreased.
  
  Are there earnings limitations?
  
  The standard 3% down program does not set limits on your income. However, the HomeReady 97% loan does require the debtor to be at or below 80% of the location's median earnings.
  
  What is a HomeReady mortgage?
  
  HomeReady is another program that requires 3% down. It has flexibilities built-in, such as using earnings from non-borrowing household members to qualify.
  
  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 home members to qualify.
  hud.gov
  How to get a standard 97 loan
  
  The Conventional 97 mortgage program is offered immediately from lenders throughout the country. Talk with your lenders about the loan requirements today.
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