What Is The Conventional 97 Mortgage?

Conventional 97 is the generic name for Fannie Mae’s and Freddie Mac’s three percent down, 30-year fixed rate mortgage loan for first-time home buyers.

The name describes the mortgage.

Conventional 97 is a conventional mortgage loan that allows up to 97 loan-to-value (LTV). It’s the counterpart to HomeReady and HomePossible, which also allow three percent down but which Fannie Mae and Freddie Mac reserve for low- and moderate-income households. There are no income limitations with Conventional 97.

Conventional 97 is sometimes called 97% LTV Standard.

Conventional 97 Loan Requirements

The Conventional 97 is the mortgage program from Fannie Mae and Freddie Mac allowing their smallest possible down payment. The Conventional 97 (and other 3% down loans) are the default mortgage choice for many first-time buyers.

Here are the requirements to use Conventional 97 to buy a home:

You must be a first-time home buyer

Conventional 97 is for first-time home buyers. At least one person on the mortgage application must be a first-time buyer. Fannie Mae and Freddie Mac define first-time home buyer as a person who has not owned a percentage of any residential property in the last 36 months.

You must make a 3% downpayment, at minimum

Conventional 97 requires that buyers make a three percent down payment, which may come from any eligible source. Eligible sources include savings, government down payment assistance programs, cash gifts from family or friends, cash grants, and loans.

You must move into the home you’re buying

Conventional 97 is for primary residences only. The program cannot be used to purchase a second home, a short-term rental property, or an investment property of any kind. 

Your home must be a 1-unit residential property

Conventional 97 is for single-family residences, which includes townhomes, condominiums, and rowhomes. Manufactured homes may be eligible. Homes with two or more units and commercial properties are ineligible.

You must meet conventional mortgage guidelines

Conventional 97 is a conforming mortgage program, meaning buyers and their applications must fall within conforming mortgage standards. Loan sizes may not exceed local conforming mortgage loan limits, buyers must provide proof of income and evidence of down payment, and loans may not be interest-only.

Your credit score must be 620 or higher

Conventional 97 requires a minimum credit score of 620. Fannie Mae and Freddie Mac use the FICO credit scoring system, which ignores medical debt and collections. 

You must attend a homeownership education class

Fannie Mae requires that first-time home buyers complete a homeownership education course before closing. Fannie Mae makes an online educational course available at no cost, which satisfies the requirement. Homeownership education reduces mortgage default risk.

Conventional 97% vs HomeReady vs Home Possible vs FHA

Conventional 97 is the catch-all conventional mortgage for low-down payment buyers. Similar to the FHA mortgage, it’s available in all 50 states and to home buyers of all income levels.

	Conventional 97	Home Possible	HomeReady	FHA
Min. Down Payment	3%	3%	3%	3.5%
Min. Credit Score	620	660	620	500
First-Time Buyers	Yes	Yes	Yes	Yes
Income Limitations	None	Yes	Yes	None
Boarder Income	Allowed	Not Allowed	Allowed	Allowed
ADU Income	Not Allowed	Not Allowed	Allowed	Not Allowed
PMI Reduced	No	Yes	Yes	No
Homeownership Education	Required	Required	Required	Not Required
Single-Family Homes	Allowed	Allowed	Allowed	Allowed
Multi-Unit Homes	Not Allowed	Allowed	Allowed	Allowed
Occupancy Rules	Main Residence	Main Residence	Main Residence	Main Residence

Alternatives to the Conventional 97 LTV Mortgage

The Standard 97 LTV is one of seven government-backed, low down payment mortgage loans. It can be a lower-cost alternative to FHA-backed mortgages for first-time buyers who show good income and better-than-average credit scores.

However, the Conventional 97 won’t be the best mortgage choice for everyone.

If you decide that the Conventional 97 mortgage won’t meet your needs, these other mortgage options for first-time home buyers might fit better:

• Home Ready: A 3% down payment mortgage from Fannie Mae for low- and moderate-income home buyers. Reduced mortgage rates and mortgage insurance costs. Low credit score minimums.
• Home Possible: A 3% down payment mortgage from Freddie Mac. Similar to HomeReady but with a higher minimum credit requirement. Reduced mortgage rates and mortgage insurance costs.
• Conventional 100: A no-money-down mortgage for first-time home buyers with average credit scores or better.
• FHA mortgage: 3.5% down payment mortgage backed by the Federal Housing Administration. No income limitations. Good for buyers with average or below-average credit scores, and buyers of multi-unit homes.
• USDA mortgage: 100% mortgage backed by the U.S. Department of Agriculture. Subsidized mortgage rates and mortgage insurance premiums. Available to buyers in low-density parts of the country. 
• VA mortgage: 100% mortgage backed by the Department of Veterans Affairs. Average credit scores are required. Available to active-duty military members, veterans, and surviving spouses.
• HomePath®: A Fannie Mae low down payment program for buyers of foreclosed and repossessed homes.

First-time home buyers may also be eligible for home buyer tax credits and local down payment assistance from their state. 

Common Questions About Conventional 97

Is Conventional 97 for first-time home buyers only?

Conventional 97 is a purchase mortgage program for first-time home buyers. At least one mortgage applicant must be a first-time buyer.

What is the minimum credit score required for Conventional 97?

Home buyers must have a mortgage credit score of at least 620 to use the Conventional 97 loan. Buyers without a credit score may also qualify.

Is Conventional 97 an FHA mortgage?

No, Conventional 97 is backed by Fannie Mae or Freddie Mac. The Federal Housing Administration backs FHA mortgages.

Is Conventional 97 a home affordability mortgage?

No, Conventional 97 is not a home affordability mortgage like HomeReady and Home Possible are. Conventional 97 doesn’t discount mortgage rates for home buyers and doesn’t offer reduced mortgage insurance rates.

Is there an income limit for Conventional 97?

Unlike HomeReady and Home Possible, Conventional 97 doesn’t limit who qualifies based on income. All first-time home buyers may be eligible.

What’s the difference between Conventional 97 and the Standard 97 LTV mortgage?

There’s no difference between the Conventional 97 and Standard 97 LTV mortgages. They are the same. Conventional 97 is a branded name for the standard mortgage product.

Can I put down more than 3 percent on a Conventional 97 mortgage?

Yes, home buyers can make a down payment of more than 3 percent with the Conventional 97 loan. However, once a buyer increases its down payment to five percent, the Conventional 97 may no longer be the most suitable mortgage option.

Does every mortgage lender offer the Conventional 97 mortgage?

Yes, the Conventional 97 should be available from every mortgage lender that offers conventional mortgage financing.

Can I use the Conventional 97 if I’m a low- or moderate-income household?

Yes, the Conventional 97 mortgage is available to all home buyers, irrespective of income. Low- and moderate-income households are eligible, and high-income earning households are eligible, too.

Is Conventional 97 better than an FHA mortgage?

Conventional 97 is not better or worse than an FHA-backed mortgage, but it may be a better or worse option for your mortgage needs.