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What Is The Conventional 97 Mortgage Loan?

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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 Fannie Mae’s and Freddie Mac’s mortgage with the smallest allowable down payment. It’s the default mortgage choice for many first-time buyers. A separate application is not required.

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.

Your down payment must be 3% of the purchase price, 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 live in the home you’re purchasing

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. 

The home may not be multi-unit or commercial

Conventional 97 is for single-family residences which includes townhomes, condominiums, and rowhomes. Manufactured homes may be eligible. Homes with 2 or more units and commercial properties are ineligible.

Your mortgage must be approved as a conforming mortgage

Conventional 97 is a conforming mortgage program, which means that 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.

You must have a credit score of 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 prior to 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 97Home PossibleHomeReadyFHA
Min. Down Payment3%3%3%3.5%
Min. Credit Score620660620580
First-Time BuyersYesYesYesYes
Income LimitationsNoneYesYesNone
Boarder IncomeAllowedNot AllowedAllowedAllowed
ADU IncomeNot AllowedNot AllowedAllowedNot Allowed
PMI DiscountsNoYesYesNo
Homeownership EducationRequiredRequiredRequiredNot Required
Single-Family HomesAllowedAllowedAllowedAllowed
Multi-Unit HomesNot AllowedAllowedAllowedAllowed
Occupancy RulesMain ResidenceMain ResidenceMain ResidenceMain Residence

Alternatives to the Conventional 97 LTV Mortgage

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

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

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

  • 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.
  • FHA mortgage: 3.5% down payment mortgage backed by the Federal Housing Administration. No income limitations. Best for buyers with average credit scores or lower, 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. 

Get pre-approved to check your eligibility.

Questions & Answers: 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 a conventional mortgage loan which means it’s backed by Fannie Mae or Freddie Mac. FHA mortgages are backed by the Federal Housing Administration. 

Is Conventional 97 a home affordability mortgage?

No, Conventional 97 is not a home affordability mortgage like HomeReady and Home Possible, 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, standard mortgage financing applies and the Conventional 97 isn’t needed. 

Does every mortgage lender offer the Conventional 97 mortgage?

Yes, the Conventional 97 is 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 earnings are eligible, too.

Is Conventional 97 for first-time home buyers only?

Yes, Conventional 97 is for first-time home buyers only. Repeat buyers may use other low down payment mortgage loans including HomeReady, Home Possible, FHA, USDA, or VA. 

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 personal situation. See which low down payment is best for your needs. Get pre-approved now.

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