What is the standard 97 loan program?

The Conventional 97 program enables homebuyers to get a standard 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 buyer makes a 3% deposit.

The loan program can fund a single-family home or condominium unit - as long as the buyer prepares to use the home as a main home.

Conventional 97 offers an alternative to FHA loans, which require a comparable 3.5% deposit.

In this article:

Conventional 97 loan guidelines Credit rating 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 standards

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

But this loan program works only for novice home buyers - specified as buyers who have not owned a home in the previous 3 years. For borrowers trying to find a low down payment mortgage, it can be a great mortgage alternative.

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 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 must be the owner's primary house
• A minimum of one customer must take a homebuyer education course
• The loan quantity need to be at or listed below $806,500
  
  These features align well with the common newbie homebuyer's profile.
  
  For instance, a lot of purchasers today are looking for a one-unit home - rather than a duplex or triplex - or a condo that they plan to reside in as their main home. First-time purchasers 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 Standard 97's average down payment at $10,500 - within reach for lots of home consumers.
  
  By contrast, making a 20% down payment would require $70,000 upfront.
  
  Check your eligibility for the conventional 97% LTV program. Start here (Aug 20th, 2025)
  
  Conventional 97 credit requirements
  
  Many property buyers assume they require impressive credit rating 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 rating as low as 620 and still qualify for a 3% down loan.
  
  How is this possible? Private mortgage insurance coverage, or PMI, is one reason. When you put less than 20% down, you'll pay these premiums which secure the lending institution in case you default.
  
  This additional layer of defense for the lender 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 open years of cost savings on interest for brand-new property owners.
  
  Yes, personal mortgage insurance would make the 3% down choice more expensive on a monthly basis, in the beginning.
  
  But the debtor's down payment requirement is substantially lower, permitting them to buy a home rather - before house prices 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 falls 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 basic Fannie Mae rates, plus a small rate boost.
  
  However, this charge or rate boost is often minimal compared to the value included from earlier home purchasing.
  
  Someone buying a $300,000 home would pay about $80 more monthly by picking the 97% loan alternative compared to a 5% down loan.
  
  Yet, the buyer reduces their total in advance home buying expenses by over $5,000.
  
  The time it takes to conserve an extra 2% deposit could imply greater property costs and harder qualifying down the roadway. For lots of buyers, it could show more affordable and quicker to go with the 3% down mortgage right away.
  
  Low deposit options to Conventional 97 loans
  
  Conventional 97 loans vs FHA loans
  
  Before Fannie Mae introduced 3% down payment traditional loans, more home purchasers who needed a low deposit loan chose an FHA loan.
  
  FHA loans are still the very best option 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 down payment in the neighborhood of a Standard 97's.
  
  But unlike traditional loans, FHA loans allow credit scores below 620 - and as low as 580. Plus, the FHA doesn't include Loan Level Price Adjustments like standard loans.
  
  So, if your credit is borderline - just hardly good enough to receive a Standard 97 - you might draw a better-rate loan from the FHA.
  
  The catch is the FHA's mortgage insurance. Unlike PMI on a standard mortgage, FHA mortgage insurance premiums (MIP) will not go away unless you put 10% or more down. You'll keep paying the yearly premiums up until you settle the loan or refinance.
  
  The FHA also charges an in advance mortgage insurance coverage premium. This one-time, upfront cost 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 - provide brand-new mortgage with no money 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 individuals who have actually served. And they're an attractive perk. Together with putting no cash down, VA borrowers will not pay annual mortgage insurance coverage - just an upfront financing charge.
  
  Zero-down USDA loans operate in rural and suburbs and just for debtors who earn less than 115% of their area's median income. They also require a higher credit report - generally 640 or higher.
  
  Conventional 97 vs other low down payment conventional loans
  
  Fannie Mae and Freddie Mac offer more than one low deposit loan. So far in this post, we have actually been going over Fannie's standard 3% down mortgage.
  
  But some debtors might prefer:
  
  Fannie Mae's HomeReady: This 3% down loan is developed for moderate-income customers. If you earn less than 80% of your location's average income, you may qualify for HomeReady. What's so great about HomeReady? In addition to low down payments, this loan offers lowered PMI rates which can decrease your monthly payments Freddie Mac's Home Possible: This 3% down loan works a lot like HomeReady. It includes the ability to utilize sweat equity toward the deposit. 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 stress over.
  
  Your loan officer can help determine the low down payment loan that works finest for you.
  
  Check your eligibility for a 3% down payment standard 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 just 3% down. It's named for the remaining 97% of the home's worth that the mortgage will fund.
  
  How do you certify for Conventional 97?
  
  Qualifying for a Traditional 97 loan requires a credit history of a minimum of 620 most of the times. Debt-to-income ratio (DTI) ought to also fall listed below 43%. There are no income limits. Borrowers who currently own a home or who have actually owned a home in the past three years won't certify.
  
  Do all lending institutions provide Conventional 97?
  
  Most loan providers use Conventional 97 loans. This item conforms to Fannie Mae's rules. Lenders that provide Fannie Mae loans will likely offer this 3% down item.
  
  Can closing costs be consisted of in a standard 97 loan?
  
  No. As its name indicates, the Conventional 97 program can finance approximately 97% of a home's evaluated worth. Rolling closing costs into the loan amount would push the loan beyond this 97% limit. However, lots of newbie property buyers certify for deposit and closing expense help grants and loans. Conventional 97 likewise allows gift funds. This means member of the family or pals could assist you cover closing costs.
  
  Who uses Conventional 97 loans?
  
  Most personal mortgage lenders - whether they're online, downtown, or in your area - offer Fannie Mae traditional loans which include Conventional 97 loans.
  
  Exists a minimum credit rating for the 3% deposit program?
  
  Borrowers need 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 lenders can set their minimum credit history higher than 620. Some might require 640 or 660, for example. Be sure to talk to your mortgage loan provider to find out for sure.
  
  Can I utilize 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 buyer. You may also get approved for deposit assistance. Your mortgage officer can help you discover programs in your state.
  
  Can I buy a condominium or townhouse?
  
  Yes. Buyers can acquire a condominium, townhome, home, or co-op using the Conventional 97 program as long as it is just one unit.
  
  Can I purchase a made home with 3% down?
  
  No. Manufactured homes are not permitted with this program.
  
  Can I purchase a 2nd home or financial investment residential or commercial property?
  
  No. The 97% loan program might be used only for the purchase of a primary residence.
  
  I owned a home 2 years ago however have actually been renting considering that. Will I certify?
  
  Not yet. You need to wait till 3 years have passed given that you had any ownership in a residence. At that point, you are considered a first-time home buyer and will be eligible to look for a Traditional 97 loan.
  
  Will mortgage insurance provider supply PMI for the 97% LTV mortgage?
  
  Yes. Mortgage insurance providers are on board with the program. You do not need to discover a PMI company because your lender will order 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 surpass adhering loan limitations. At this time, high balance, also called conforming jumbo loans - those over $806,500 - are not eligible.
  
  I'm already authorized 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 procedure, your lending institution can re-underwrite your loan if it provides the Conventional 97 program. Remember 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 total profile including credit rating identifies your DTI optimum. While there's no hard-and-fast number, a lot of loan providers set an optimum DTI at 43%. This means that your future principal, interest, tax, insurance coverage, and HOA dues plus all other monthly debt payments (trainee loans, charge card minimum payments) can be no more than about 43% of your gross income.
  
  Can I use the 3% down program to re-finance?
  
  Yes. If you have an existing Fannie Mae loan, you may be able to re-finance as much as 97% of the current value. Refinancing may permit debtors to decrease their regular monthly payments or get rid of mortgage insurance premiums.
  
  Click on this link for more details about the 97% LTV re-finance program.
  
  Why is the program only for first-time home buyers?
  
  Fannie Mae's research study uncovered that the greatest barrier to homeownership for novice homebuyers was the deposit requirement. To stimulate more individuals to purchase their very first home, the minimum deposit was reduced.
  
  Are there earnings limits?
  
  The basic 3% down program does not set limits on your earnings. However, the HomeReady 97% loan does require the customer to be at or below 80% of the area's median earnings.
  
  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 family members to qualify.
  
  To see if you certify for the HomeReady program, see the complete standards here.
  
  What is the Home Possible Advantage program?
  
  HomeReady is another program that needs 3% down. HomeReady loans have versatilities integrated, such as using income from non-borrowing home members to certify.
  
  How to get a conventional 97 loan
  
  The Conventional 97 mortgage program is offered right away from lenders throughout the country. Talk with your loan providers about the loan requirements today.