What Is a Conventional 97 Mortgage?
A Conventional 97 mortgage is a 3% downpayment mortgage backed by Fannie Mae. It's a low-downpayment conventional loan for first-time home buyers with decent credit.
The Conventional 97 allows buyers to finance up to 97% loan-to-value (LTV) with no income or geographical restrictions.
Key Facts at a Glance
| Requirement | Conventional 97 Mortgage |
|---|---|
| Minimum Credit Score | 620 |
| Minimum Down Payment | 3% |
| Current Average Rate | 6.50% |
| Income Limits | None |
| Suitable For | First-time home buyers with good credit |
Key Definitions
Here are the key terms you'll encounter when exploring Conventional 97 loans:
- First-Time Home Buyer
- A person who has not owned a percentage of any residential property in the last 36 months. At least one person on the Conventional 97 mortgage application must meet this definition.
- Private Mortgage Insurance (PMI)
- Insurance required when your down payment is less than 20%, protecting the lender if you default. Conventional 97 PMI can be cancelled once you reach 20% equity in your home. See our PMI rules for Conventional 97 for more details.
- Debt-to-Income Ratio (DTI)
- The percentage of your gross monthly income that goes toward debt payments. Conventional 97 allows DTI up to 43% .
- Loan-to-Value Ratio (LTV)
- The ratio of your loan amount to the home's appraised value. Conventional 97 allows up to 97% LTV with 3% down payment.
- Homeownership Education
- A required course for first-time home buyers that prepares them for the responsibilities of owning a home. Fannie Mae offers a free online course that satisfies this requirement.
- Conforming Loan Limits
- The maximum loan amount allowed for conventional mortgages in your area. Conventional 97 loans cannot exceed these limits, which vary by county.
Who Is the Conventional 97 Program For?
The Conventional 97 program has specific eligibility requirements. Here's who typically qualifies.
| Qualification Requirement | Description |
|---|---|
| First-Time Home Buyer | You must be a first-time home buyer, defined as someone who has not owned a residential property in the last 36 months. At least one person on the mortgage must meet this requirement. |
| Good Credit Score | A minimum credit score of 620 is required, making it accessible for those with established credit history. |
| Limited Cash for Down Payment | You can get into a home with as little as 3% down, and the funds can come from gifts, grants, or other sources. Learn more about Conventional 97 down payment and closing costs. |
| No Income Restrictions | Unlike HomeReady and Home Possible, Conventional 97 has no income limits, making it available to buyers of all income levels. |
| Primary Residence Purchase | The home must be your primary residence — the program cannot be used for second homes, rental properties, or investment properties. |
Conventional 97 Loan Benefits
Conventional 97 offers eligible buyers several distinct advantages over standard conventional home loans.
| Conventional 97 Feature | How It Helps You |
|---|---|
| Low 3% Down Payment | Buy a home with just 3% down. |
| Flexible Funding Sources | Savings, gifts, or down payment assistance. |
| Cancellable Mortgage Insurance | Cancel PMI after reaching 20% equity to lower your payment. |
| No Income Limitations | No income limits—open to all first-time buyers. |
| Available Nationwide | Offered in all 50 states for first-time buyers. |
| Standard Conventional Terms | Follows standard conventional loan rules for predictable terms. |
Conventional 97 Loan Requirements
To qualify for a Conventional 97 loan, you and the property you're buying must meet a specific set of criteria established by Fannie Mae. These requirements ensure the program serves its intended audience of first-time home buyers.
Must Be A First-Time Home Buyer
Conventional 97 is designed specifically for first-time home buyers. Fannie Mae defines a first-time home buyer as a person who has not owned a percentage of any residential property in the last 36 months. At least one person on the mortgage application must meet this definition.
Must Make A 3% Down Payment
The minimum down payment for a Conventional 97 loan is just 3% of the home's purchase price. These funds can come from various sources, not just your own savings. This flexibility makes it easier to gather the necessary funds for closing. You can use savings, government down payment assistance programs, cash gifts from family or friends, cash grants, and loans.
Must Have A 620 Credit Score or Higher
A minimum credit score of 620 is required for a Conventional 97 loan. Fannie Mae uses the FICO credit scoring system, which ignores medical debt and collections. If you don't have a credit score, you may still be able to use non-traditional credit history.
Must Complete Homeownership Education
Fannie Mae requires that first-time home buyers complete a homeownership education course before closing. This course prepares you for the responsibilities of owning a home.
Must Occupy A Single-Family Home
Conventional 97 is designed for single-family residences, which includes townhomes, condominiums, and rowhomes. Manufactured homes may be eligible. The home must be your primary residence.
Comparing Conventional 97, FHA, and HomeReady Loans
When looking for a low-down-payment mortgage, you'll likely compare Conventional 97 vs FHA and other options like HomeReady. Understanding their key differences will help you decide which program is the best fit for your financial situation.
| Feature | Conventional 97 | HomeReady | FHA Loan |
|---|---|---|---|
| Minimum Down Payment | 3% | 3% | 3.5% |
| Credit Score Minimum | 620 | 620 | 580 |
| Mortgage Insurance | Cancellable PMI at 20% equity | Cancellable PMI at 20% equity | MIP for life |
| Income Limits | None | 80% of Area Median Income | None |
| Property Types | 1-unit only | 1-4 unit | 1-4 unit |
| Upfront Insurance | None | None | 1.75% upfront MIP |
| First-Time Buyer Only | Yes | No | No |
| Best For | First-time buyers with good credit | Low-to-moderate income borrowers | Lower credit scores, multi-unit properties |
Solutions for Your Homeownership Journey
I'm not a first-time home buyer
Conventional 97 is designed for first-time home buyers. If you don't qualify, you have several excellent alternatives:
| Alternative Program | First-Time Buyer Requirement | Credit Score | Down Payment |
|---|---|---|---|
| HomeReady | No | 620 | 3% |
| Home Possible | No | 620 | 3% |
| FHA Loan | No | 580 | 3.5% |
| Standard Conventional | No | 620 | 3-20% |
My credit score is below 620
If your score is lower, FHA may be your only low-down-payment option. See our Conventional 97 vs FHA comparison for details.
I don't have money for a down payment
You can combine Conventional 97 with down payment assistance programs or use gift funds to meet the minimum requirement. Our Conventional 97 down payment guide explains how.
Conventional 97: Key Opportunities and Benefits
- Your credit score opens doors to better rates with Conventional 97.
- PMI becomes an investment in your future — see how in our PMI rules for Conventional 97.
- You can start your homeownership journey with just 3% down plus closing costs.
- Good credit rewards you with better rates, especially when comparing Conventional 97 vs FHA.
- Gift funds and assistance programs can help you buy sooner.
Frequently Asked Questions
What is a Conventional 97 mortgage?
A conventional loan that allows 97% loan-to-value (3% down payment) for first-time home buyers with good credit.
Who qualifies for Conventional 97?
First-time home buyers with a minimum credit score of 620 who can afford 3% down payment.
Are there income limits for Conventional 97?
No, unlike HomeReady and Home Possible, Conventional 97 has no income restrictions.
Can I use gift funds for the down payment?
Yes, gift funds from family members can be used to cover the 3% down payment requirement.
Is PMI required on Conventional 97 loans?
Yes, PMI is required when putting less than 20% down, but it can be cancelled once you reach 20% equity.
