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Guidelines & Requirements 2025

What is the standard 97 loan program?

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

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

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

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

In this post:

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 Traditional 97 Loan

2025 conventional 97 standards

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

But this loan program works only for first-time home purchasers – defined as buyers who have not owned a home in the past 3 years. For customers searching for a low down payment mortgage, it can be a great mortgage alternative.

Here are some other Conventional 97 loan credentials:

– 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 should not have owned a home in the last three years
– The residential or commercial property needs to be the owner’s primary home
– A minimum of one debtor must take a homebuyer education course
– The loan amount need to be at or listed below $806,500

These functions align well with the normal first-time homebuyer’s profile.

For example, most buyers today are searching for a one-unit home – rather than a duplex or triplex – or an apartment that they prepare to live in as their primary home. First-time purchasers are also most likely to be seeking something with a lower purchase cost.

Today’s average home rate 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 consumers.

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

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

Conventional 97 credit requirements

Many homebuyers presume they need impeccable credit history to certify 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 can have a rating as low as 620 and still receive 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 safeguard the loan provider in case you default.

This extra layer of defense for the loan provider allows 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 cost savings on interest for new property owners.

Yes, personal mortgage insurance would make the 3% down option more pricey on a regular monthly basis, at initially.

But the debtor’s down payment requirement is significantly lower, allowing them to buy a home rather – before house 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 percentage 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 interest rates

Mortgage rates for the 3% down payment program are based on standard Fannie Mae rates, plus a slight rate increase.

However, this charge or rate boost is typically minimal compared to the value added from earlier home buying.

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

Yet, the purchaser lowers their overall in advance home purchasing costs by over $5,000.

The time it requires to save an additional 2% deposit might mean greater property prices and tougher certifying down the roadway. For numerous buyers, it could prove more affordable and quicker to choose for the 3% down mortgage instantly.

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 required a low deposit loan picked an FHA loan.

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

But unlike traditional loans, FHA loans permit 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 – just barely excellent enough to get approved for 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 coverage premiums (MIP) won’t go away unless you put 10% or more down. You’ll keep paying the annual premiums till you settle the loan or refinance.

The FHA also charges an upfront mortgage insurance premium. This one-time, upfront charge totals 1.75% of the loan amount 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 brand-new mortgage without any money 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 individuals who have actually served. And they’re an appealing perk. Along with putting no money down, VA borrowers won’t pay yearly mortgage insurance coverage – just an in advance funding fee.

Zero-down USDA loans work in rural and suburban areas and just for borrowers who make less than 115% of their location’s mean income. They also need a greater credit history – generally 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 going over Fannie’s basic 3% down mortgage.

But some customers may choose:

Fannie Mae’s HomeReady: This 3% down loan is created for moderate-income debtors. If you earn less than 80% of your area’s mean income, you might receive HomeReady. What’s so good about HomeReady? In addition to low down payments, this loan provides minimized 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 adds the ability 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 resembles the standard Conventional 97 from Fannie Mae. Unlike HomeReady and Home Possible, there are no earnings restricts to fret about.

Your loan officer can help identify the low deposit loan that works finest for you.

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

97% LTV Home Purchase FAQ

What is a Conventional 97 loan?

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

How do you get approved for Conventional 97?

Getting approved for a Standard 97 loan requires a credit history of a minimum of 620 in many cases. Debt-to-income ratio (DTI) need to likewise fall below 43%. There are no earnings limits. Borrowers who already own a home or who have owned a home in the past three years will not certify.

Do all lending institutions use Conventional 97?

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

Can closing expenses be consisted of in a standard 97 loan?

No. As its name shows, the Conventional 97 program can finance up to 97% of a home’s evaluated worth. Rolling closing expenses into the loan amount would push the loan beyond this 97% threshold. However, numerous first-time property buyers certify for deposit and closing expense help grants and loans. Conventional 97 likewise enables gift funds. This suggests relative or pals could help you cover closing expenses.

Who provides Conventional 97 loans?

Most private mortgage lending institutions – whether they’re online, downtown, or in your community – offer Fannie Mae traditional loans which consist of Conventional 97 loans.

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

Borrowers need a credit report 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 rating. Mortgage lenders can set their minimum credit rating higher than 620. Some may need 640 or 660, for example. Make sure to inspect with your mortgage loan provider to discover for sure.

Can I utilize down payment present funds?

Yes. Fannie Mae states gift funds may be utilized for the down payment and closing costs. Fannie does not set a minimum out-of-pocket requirement for the buyer. You might likewise receive down payment support. Your mortgage officer can assist you find programs in your state.

Can I purchase a condominium or townhouse?

Yes. Buyers can purchase a condo, townhome, home, or co-op using the Conventional 97 program as long as it is just one system.

Can I buy a made home with 3% down?

No. Manufactured homes are not allowed with this program.

Can I purchase a 2nd home or investment residential or commercial property?

No. The 97% loan program may be used just for the purchase of a main home.

I owned a home 2 years ago but have been leasing since. Will I qualify?

Not yet. You should wait till 3 years have actually passed because you had any ownership in a house. At that point, you are thought about a novice home buyer and will be qualified to look for a Traditional 97 loan.

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

Yes. Mortgage insurers are on board with the program. You do not have to find a PMI company considering that your lending institution will order mortgage insurance coverage for you.

Just how much is mortgage insurance?

Mortgage insurance varies 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 lending institutions surpass adhering loan limits. At this time, high balance, also known as conforming jumbo loans – those over $806,500 – are not qualified.

I’m already approved putting 5% down, but I want to make a 3% deposit rather. 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 provides the Conventional 97 program. Bear in mind your debt-to-income ratio will increase with the higher loan amount and potentially higher rate.

Check your mortgage rates. Start here (Aug 20th, 2025)

What’s the maximum debt-to-income (DTI) ratio for the 97% LTV program?

Your total profile consisting of credit score identifies your DTI maximum. While there’s no mandatory number, the majority of lenders set a maximum DTI at 43%. This indicates that your future principal, interest, tax, insurance, and HOA dues plus all other regular monthly financial obligation payments (trainee loans, charge 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 might be able to re-finance approximately 97% of the present worth. Refinancing might enable debtors to lower their monthly payments or eliminate mortgage insurance coverage 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 revealed that the most significant barrier to homeownership for newbie property buyers was the deposit requirement. To stimulate more people to buy their very first home, the minimum down payment was lowered.

Are there income limits?

The basic 3% down program does not set limitations on your earnings. However, the HomeReady 97% loan does require the customer to be at or below 80% of the area’s median income.

What is a HomeReady mortgage?

HomeReady is another program that requires 3% down. It has versatilities integrated, such as utilizing income from non-borrowing family members to qualify.

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 requires 3% down. HomeReady loans have flexibilities integrated, such as using earnings from non-borrowing family members to certify.

How to get a traditional 97 loan

The Conventional 97 mortgage program is available immediately from lenders throughout the nation. Talk with your lending institutions about the loan requirements today.