Written by Dan Green
Dan Green
Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about Dan Green.
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This article was checked for accuracy as of September 22, 2024. Learn more about our commitments to accuracy and your mortgage education in our editorial guidelines.
Updated: September 22, 2024
This guide to Conventional 97 vs FHA mortgages compares two popular low-down-payment mortgage loans side-by-side. Use this comparison to decide which low-down-payment mortgage option is most suitable for your upcoming home purchase.
The Conventional 97 and the FHA mortgage are both low-down-payment mortgage options. Each has an official name that is not frequently used – the 97 LTV mortgage and the FHA 203(b), respectively – but that is where their similarities end.
The Conventional 97 is a low-down-payment mortgage for first-time home buyers offered by Fannie Mae. The “97” in its name refers to the loan-to-value (LTV) ratio, representing a 97% LTV, which reflects the program’s minimum 3 percent down payment requirement.
Key features of the Conventional 97 mortgage include:
FHA mortgages are insured by the Federal Housing Administration’s mortgage insurance program. More appropriately, they should be referred to as FHA-insured mortgages because the FHA’s Mutual Mortgage Insurance Fund insures 7.5 million FHA mortgages against losses for lenders.
Key FHA loan features include:
Mortgage underwriting is generally more lenient for FHA loans than for Conventional 97 mortgages, especially for buyers with less-than-perfect credit.
| Loan Feature | Conventional 97 | FHA |
| Minimum Loan Size Allowed | None | None |
| Maximum Loan Size Allowed | See Loan Limits | See Loan Limits |
| Maximum Household Income Allowed | No Restrictions | No Restrictions |
| Minimum Credit Score Required | 620 | 500 |
| Debt-to-Income Maximum - Standard | 50.00% | 43.00% |
| Debt-to-Income Maximum with Compensating Factors | 50.00% | 50.00% |
| Minimum Downpayment Required | 3.00% | 3.50% |
| Maximum Loan-To-Value Allowed | 97.00% | 96.50% |
| Maximum Combined Loan-to-Value Allowed | 105% | 100% |
| First-Time Homebuyer Education Required | Yes | No |
| Minimum Age Allowed | Minimum Legal Age | Minimum Legal Age |
| Maximum Age Allowed | None | None |
| First-Time Home Buyers Allowed | Yes | Yes |
| First-Time Home Buyers Only | Yes | No |
| Low-Down Payment Mortgage Classification | Yes | Yes |
| Income Verification Required | Yes | Yes |
| Military Service Required | No | No |
| States Allowed | All States | All States |
| Homeowners Insurance Required | Yes | Yes |
| Escrow Taxes & Insurance Required | Recommended | Yes |
| Loan Feature | Conventional 97 | FHA |
| Average Interest Rate: Last Year | Not Tracked | 4.99% |
| Average Loan Size: Last Year | Not Tracked | $279,773 |
| Average Approval Rate: Last Year | Not Tracked | 75.02% |
| Market Share: Last Year | Not Tracked | 17.97% |
| Purchase Mortgages Originated: Last Year | Not Tracked | 887,234 |
| Loan Feature | Conventional 97 | FHA |
| 1-Year ARM Available | No | Yes |
| 5-Year ARM Available | No | Yes |
| 10-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 15-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 20-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 25-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 30-Year Fixed-Rate Mortgage Available | Yes | Yes |
| Temporary Buydowns Available | Yes | Restricted |
| Loan Feature | Conventional 97 | FHA |
| Funding Fee / Guarantee Fee | No | No |
| Upfront Mortgage Insurance Premium | No | Yes |
| Annual Mortgage Insurance Premium | No | Yes |
| Private Mortgage Insurance | Yes | No |
| Loan Feature | Conventional 97 | FHA |
| Primary Residence | Yes | Yes |
| Second Home | Yes | Restricted |
| Vacation Home | Yes | No |
| Investment Property | Yes | No |
| Non-Occupant Co-Borrower | Yes | Yes |
| Loan Feature | Conventional 97 | FHA |
| U.S. Citizen Allowed | Yes | Yes |
| Permanent Resident Alien Allowed | Yes | Yes |
| Non-Permanent Resident Alien Allowed | Yes | Yes |
| Foreign National Allowed | Yes | Yes |
| Buyers With Diplomatic Immunity Allowed | Yes | Yes |
| Loan Feature | Conventional 97 | FHA |
| Credit Scoring Model | Tri-merge | Tri-merge |
| Non-Traditional Credit References Allowed | Yes | Yes |
| Deferred Student Loans | Lesser of 5% of balance or monthly payment | Actual Payment or 0.5% of Loan Balance |
| Deferred Debt Calculation | Lesser of 5% of balance or monthly payment | Lesser of 5% of balance or monthly payment |
| Pay Off Medical Collections Prior To Closing | No | Not Required |
| Pay Off Non-Medical Collections Prior To Closing | No | Required when collections exceed $2,000 |
| Bankruptcy, Chapter 7 | 4-year waiting period | 2-Year Waiting Period |
| Bankruptcy, Chapter 13 | 4-year waiting period | 1-Year From Filing |
| Short Sale | 4-year waiting period | 3-Year Waiting Period |
| Foreclosure | 7-year waiting period | 3-Year Waiting Period |
| Judgments & Liens Allowed | Must be satisfied | Must be satified |
| Federal Income Tax Delinquency Allowed | Must be satisfied | No |
| Loan Feature | Conventional 97 | FHA |
| Minimum Square Footage Allowed | No minimum | No minimum |
| Maximum Square Footage Allowed | No maximum | No maximum |
| Single-Family Residences Allowed | Yes | Yes |
| Condominiums Allowed | Yes | Yes |
| Non-Warrantable Condominiums Allowed | No | No |
| Co-ops Allowed | No | Yes |
| Townhomes Allowed | Yes | Yes |
| 2-4 Unit Homes Allowed | Yes | Yes |
| Manufactured Homes Allowed | Yes | Yes |
| Fraternity and Sorority Houses Allowed | No | No |
| Tiny Homes Allowed | Yes | Yes |
| Modular Homes Allowed | Yes | Yes |
| Cob Homes Allowed | Yes | No |
| Shipping Container Homes Allowed | Yes | Yes |
| Condotels Allowed | No | No |
| Bed & Breakfast Allowed | Yes | No |
| Working Farms Allowed | Yes | No |
| Working Ranches Allowed | Yes | No |
| Houseboats Allowed | No | No |
| Log Homes Allowed | Yes | Yes |
| Geodesic Homes Allowed | Yes | No |
| Timeshares Allowed | No | No |
| Homes with Solar Panels Allowed | Yes | Restricted |
| 3-D Printed Homes Allowed | Yes | No |
| Leasehold Estates Allowed | Yes | Yes |
| Mixed-Use Properties Allowed | Yes | Yes |
| Flood Zones Allowed | Yes | Only where insurable |
| Properties With More Than 20 Acres Allowed | Yes | Yes |
| Properties with PACE Allowed | Must be subordinated | No |
| Loan Feature | Conventional 97 | FHA |
| Inter Vivos Revocable Trust Allowed | Yes | Yes |
| Closing in a Corporation Allowed | No | Yes |
| Community Land Trust Allowed | Yes | Yes |
| Non-Profit Organizations Allowed | No | Yes |
| Municipal Government Agencies Allowed | No | Yes |
| Loan Feature | Conventional 97 | FHA |
| W-2 Income Allowed | Yes | Yes |
| Self-Employment Income Allowed | Yes | Yes |
| Investment Income Allowed | Yes | Yes |
| Retirement Income Allowed | Yes | Yes |
| Trust Income Allowed | Yes | Yes |
| Social Security Income Allowed | Yes | Yes |
| Military Income Allowed | Yes | Yes |
| Rental Income Allowed | Yes | Restricted |
| Asset Depletion as Income Allowed | Yes | No |
| Offer Letter Income Allowed | Yes | No |
| Disability Income Allowed | Yes | Yes |
| Alimony and Child Support Income Allowed | Yes | Yes |
| Boarder Income Allowed | Yes | Restricted |
| Accessory Dwelling Unit Income Allowed | Yes | Yes |
| Cannabis Industry Income Allowed | Yes | No |
| Automobile Allowance as Income Allowed | Yes | Yes |
| Housing Allowance as Income Allowed | Yes | Yes |
| Temporary Leave Income Allowed | Yes | Restricted |
| Bank Statements as Income Allowed | No | No |
| Debts Paid By Others as Income Allowed | Yes | No |
| Loan Feature | Conventional 97 | FHA |
| Seasoning Requirements | 60 days | 30 Days |
| Reserves Required | No | No |
| Cash Gift For Downpayment Allowed | No | Yes |
| Seller Concessions, Maximum | 3.00% | 6.00% |
| Salary Advance for Downpayment Allowed | No | No |
| Relocation Funds for Downpayment Allowed | Yes | Restricted |
| Gift of Equity Allowed | Yes | Yes |
| Sweat Equity Allowed | Yes | Yes |
| Crypto for Downpayment Allowed | Yes | Restricted |
| Cash Value For Credit Card Rewards Allowed | Yes | No |
| Cash Value For Airline Rewards Allowed | Yes | No |
| Loan Feature | Conventional 97 | FHA |
| Assumable Mortgage Allowed | No | Yes |
| Trailing Co-Borrower Allowed | Yes | Yes |
| Maximum Properties Financed Allowed | 2 | 1 |
| Flipped Homes Allowed | Yes | Restricted |
| Arms-Length Transaction Required | No | No |
| Occupancy Deadline | 60 days | 60 days |
| Delayed Financing Allowed | Yes | No |
| Prepayment Penalty Allowed | No | No |
| Termite Inspection Required | No | Yes |
| Power of Attorney Allowed | Yes | Yes |
| Repair Allowances Allowed | Yes | No |
| Gifts From Charitable Organizations Allowed | No | No |
This mortgage comparison between the Conventional 97 and FHA mortgages is based on current guidelines published by Fannie Mae and the FHA. These guidelines are subject to change when mortgage guidelines are updated.
Mortgage lenders may impose additional lender overlays on top of the official mortgage guidelines. These overlays could affect mortgage underwriting and your ability to get approved.
If one lender turns down your Conventional 97 or FHA mortgage application, this does not necessarily mean that all lenders will do the same. It may be possible to get approved with a different lender.
Consult with multiple lenders about your mortgage rates and available choices.
Want to make an informed decision? Visit our comprehensive Conventional 97 and FHA mortgage guide pages. When you’re ready, you can start your mortgage pre-approval at Homebuyer.com.
This article, "Conventional 97 vs FHA: Compare Side by Side," authored by Dan Green, is based on extensive professional mortgage experience and includes references to trusted sources such as industry-leading financial institutions and expert research from the following websites:
This article was last updated on September 22, 2024.
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