Conventional 97 Loan | Guidelines & Requirements 2026

What is the conventional 97 loan program?

A Conventional 97 loan allows homebuyers to get a conventional mortgage with only 3% down.

The program is named for the 97% of the home value that is financed by the lender after the buyer makes a 3% down payment.

The loan program can finance a single-family home or condo unit, as long as the buyer plans to use it as a primary residence.

Conventional 97 offers an alternative to FHA loans, which require a similar 3.5% down payment.

Check your eligibility for a 3% down payment conventional mortgage. Start here (Nov 10th, 2026)

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In this article:

• Conventional 97 loan guidelines
• Credit score requirements
• Conventional 97 mortgage rates
• Conventional 97 vs FHA and other loan types
• Conventional 97 loan FAQ
• How to get a Conventional 97 Loan

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2026 conventional 97 guidelines

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

But this loan program works only for first-time home buyers, defined as buyers who haven’t owned a home in the past three years. For borrowers looking for a low down payment mortgage, it can be a good mortgage option.

Here are some other Conventional 97 loan qualifications:

• The loan must be a fixed-rate mortgage
• The property must be a one-unit single-family home, co-op, PUD, or condo
• At least one buyer must not have owned a home in the last three years
• The property must be the owner’s primary residence
• If all borrowers are first-time home buyers, at least one must take a homebuyer education course
• In most cases, every borrower must live in the home
• The loan amount must be at or below $832,750

These features align well with the typical first-time homebuyer’s profile.

For instance, most buyers today are looking for a one-unit home (as opposed to a duplex or triplex) or a condo. They plan to live in it as their primary residence. First-time buyers are also likely to be seeking something with a lower purchase price.

The median existing-home price is now above $400,000, according to the National Association of Realtors. On a $400,000 home, a Conventional 97 down payment is $12,000, within reach for many home shoppers.

By comparison, making a 20% down payment on that home would require $80,000 upfront.

Check your eligibility for the conventional 97% LTV program. Start here (Nov 10th, 2026)

What credit score do you need?

Many homebuyers assume they need impeccable credit scores to qualify for a loan that requires only 3% down. That’s not the case.

Conventional 97 loans must be approved through Fannie Mae’s Desktop Underwriter (DU) system. For DU loan files created on or after Nov. 16, 2025, Fannie Mae no longer sets a minimum credit score. The old minimum was 620. DU now looks at your whole credit profile instead. Many lenders and mortgage insurers still require a score of 620 or higher, so ask your lender about its minimum. Fannie Mae also accepts VantageScore 4.0 scores.

A lower score does raise your costs. Fannie Mae’s Loan Level Price Adjustment (LLPA) chart shows the extra pricing for lower scores and smaller down payments. But Fannie waives these fees for first-time buyers whose income is at or below 100% of the area median income (120% in high-cost areas).

How is this possible? Private mortgage insurance, or PMI, is one reason. When you put less than 20% down, you’ll pay these premiums which protect the lender in case you default.

This extra layer of protection for the lender enables the lender to offer lower rates.

Check your 97% LTV rates. Start here (Nov 10th, 2026)

Is it worth paying PMI?

PMI gets a bad rap. But paying it can provide decades of savings on interest for new homeowners.

Yes, private mortgage insurance would make the 3% down option more expensive on a monthly basis, at first.

But the borrower’s down payment requirement is substantially lower, allowing them to buy a home much sooner, before house prices increase again.

And remember, you can ask your lender to cancel PMI when the loan’s balance reaches 80% of the home’s original value. Lenders call this percentage your loan-to-value ratio, or LTV.

When your balance is scheduled to reach 78% of the home’s original value, PMI drops off automatically.

How do interest rates compare?

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

However, this fee or rate increase is often minimal compared to the value added from earlier home buying.

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

Yet, the buyer reduces their total upfront home buying costs by over $5,000.

The time it takes to save an extra 2% down payment could mean higher real estate prices and tougher qualifying down the road. For many buyers, it could prove much cheaper and quicker to opt for the 3% down mortgage immediately.

Low down payment alternatives to Conventional 97 loans

Conventional 97 loans vs FHA loans

Before Fannie Mae introduced 3% down payment conventional loans, more home buyers who needed a low down payment loan chose an FHA loan.

FHA loans remain a strong choice for a lot of buyers. The Federal Housing Administration, which insures these loans, requires 3.5% down for most new home buyers, putting an FHA down payment in the neighborhood of a Conventional 97’s.

FHA loans allow credit scores as low as 580 with 3.5% down, or as low as 500 with 10% down. Fannie Mae no longer sets a minimum score for DU loans, but many lenders still require 620 or higher for a conventional loan. Plus, the FHA doesn’t add Loan Level Price Adjustments like conventional loans.

So, if your credit is borderline, just barely good enough to qualify 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 conventional mortgage, FHA mortgage insurance premiums (MIP) last for the life of the loan unless you put 10% or more down. With 10% or more down, they end after 11 years. Otherwise, you’ll keep paying the annual premiums until you pay off the loan or refinance. For most FHA buyers, the annual premium is 0.55% of the loan amount.

The FHA also charges an upfront mortgage insurance premium. This one-time, upfront fee totals 1.75% of the loan amount for most borrowers.

VA and USDA loan comparisons

FHA isn’t the only government-backed loan program. Two other programs, USDA loans and VA loans, offer new home loans with no money down.

Unlike FHA and conventional loans, USDA and VA loans won’t work for just any borrower.

VA loans go to military members or veterans. They’re a perk for people who have served. And they’re an attractive perk. Along with putting no money down, VA borrowers won’t pay annual mortgage insurance, just an upfront funding fee.

Zero-down USDA loans work in rural and suburban areas and only for borrowers who earn less than 115% of their area’s median income. They also require a higher credit score, usually 640 or higher.

Conventional 97 vs other low down payment conventional loans

Fannie Mae and Freddie Mac offer more than one low down payment loan. So far in this post, we’ve been discussing Fannie’s standard 3% down mortgage.

But some borrowers may prefer:

• Fannie Mae’s HomeReady: This 3% down loan is designed for moderate-income borrowers. If you earn less than 80% of your area’s median income, you may qualify for HomeReady. What’s so good about HomeReady? In addition to low down payments, this loan offers reduced PMI rates which can lower your monthly 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 need 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. It is for first-time homebuyers: at least one borrower must not have owned a home in the past three years. Unlike HomeReady and Home Possible, there are no income limits to worry about. HomeOne is fixed-rate only and is for one-unit homes you will live in.

Your loan officer can help identify the low down payment loan that works best for you.

97% LTV Home Purchase FAQ

What is a Conventional 97 loan?

A Conventional 97 is a conventional mortgage that requires only 3% down. It’s named for the remaining 97% of the home’s value that the mortgage will finance.

How do you qualify for Conventional 97?

At least one borrower must be a first-time home buyer, which means no ownership interest in a home in the past three years. The loan must be approved through Fannie Mae’s DU system. Fannie Mae no longer sets a minimum credit score for DU loans, but many lenders still require 620 or higher. DU allows a debt-to-income ratio (DTI) of up to 50%, depending on your overall profile. There are no income limits.

Do all lenders offer Conventional 97?

Most lenders offer Conventional 97 loans. This product conforms to Fannie Mae’s rules. Lenders that offer Fannie Mae loans will likely offer this 3% down product.

Can closing costs be included in a conventional 97 loan?

No. As its name indicates, the Conventional 97 program can finance up to 97% of a home’s appraised value. Rolling closing costs into the loan amount would push the loan beyond this 97% threshold. However, many first-time homebuyers qualify for down payment and closing cost assistance grants and loans. Conventional 97 also allows gift funds. This means family members or friends could help you cover closing costs.

Who offers Conventional 97 loans?

Most private mortgage lenders, whether online, downtown, or in your neighborhood, offer Fannie Mae conventional loans which include Conventional 97 loans.

Credit and gift funds

Is there a minimum credit score for the 3% down payment program?

Not from Fannie Mae. For DU loan files created on or after Nov. 16, 2025, Fannie Mae does not set a minimum credit score, and Conventional 97 loans must go through DU. Lenders and mortgage insurers can still set their own minimums. Many require 620, and some require 640 or 660. Be sure to check with your mortgage lender to find out for sure.

Can I use down payment gift funds?

Yes. Fannie Mae states gift funds may be used for the down payment and closing costs. Fannie does not set a minimum out-of-pocket requirement for the buyer. You may also qualify for down payment assistance. Your mortgage officer can help you find programs in your state.

Eligible properties and prior ownership

Can I buy a condo or townhome?

Yes. Buyers can purchase a condo, townhome, house, or co-op using the Conventional 97 program as long as it is only one unit.

Can I buy a manufactured home with 3% down?

Usually not. Standard manufactured homes are not eligible for 97% financing. The exception is a home that meets Fannie Mae’s MH Advantage requirements, which are higher construction and design standards. Ask your lender whether a home qualifies.

Can I buy a second home or investment property?

No. The 97% loan program may be used only for the purchase of a primary residence.

I owned a home two years ago but have been renting since. Will I qualify?

Not yet. You must wait until three years have passed since you had any ownership in a residence. At that point, you are considered a first-time home buyer and will be eligible to apply for a Conventional 97 loan. You may not have to wait, though. You can qualify now if a co-borrower who will live in the home is a first-time buyer. Fannie Mae’s HomeReady program also allows 3% down with no first-time buyer rule, if your income is at or below 80% of your area’s median income.

Mortgage insurance and loan limits

Will mortgage insurance companies provide PMI for the 97% LTV home loan?

Yes. Mortgage insurers are on board with the program. You do not have to find a PMI company since your lender will order mortgage insurance for you.

How much is mortgage insurance?

Mortgage insurance varies widely based on credit score, from $75 to $125 per $100,000 borrowed, per month.

Can I get a conforming jumbo loan with 3% down?

No. This program won’t let lenders exceed conforming loan limits. At this time, high balance loans, also known as conforming jumbo loans, are not eligible. These are loans over $832,750.

I’m already approved putting 5% down, but I’d like to make a 3% down payment instead. Can I do that?

Yes. Even if you’ve already been through the underwriting process, your lender can re-underwrite your loan if it offers the Conventional 97 program. Keep in mind your debt-to-income ratio will rise with the higher loan amount and potentially higher rate.

Check your mortgage rates. Start here (Nov 10th, 2026)

Debt-to-income ratio and refinancing

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

Your overall profile including credit score determines your DTI maximum. Fannie Mae’s DU system allows a DTI of up to 50%. Some lenders set a lower maximum. A 50% DTI means that your future principal, interest, tax, insurance, and HOA dues plus all other monthly debt payments (student loans, credit card minimum payments) can be no more than half of your gross income. The 43% limit you may have heard of came from an old federal rule for qualified mortgages, which was replaced in 2021.

Can I use the 3% down program to refinance?

Yes. If you have an existing Fannie Mae loan, you may be able to refinance up to 97% of the current value. Refinancing might allow borrowers to lower their monthly payments or eliminate mortgage insurance premiums.

Click here for more information about the 97% LTV refinance program.

Why is the program only for first-time home buyers?

Fannie Mae’s research uncovered that the biggest barrier to homeownership for first-time homebuyers was the down payment requirement. To spur more people to buy their first home, the minimum down payment was lowered.

Income limits and other programs

Are there income limits?

The standard 3% down program does not set limits on your income. However, the HomeReady 97% loan does require the borrower 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 flexibilities built-in, such as using income from non-borrowing household members to qualify.

To see if you qualify for the HomeReady program, see the complete guidelines here.

What is the Freddie Mac Home Possible program?

Home Possible is Freddie Mac’s 3% down program for low- to moderate-income borrowers. Your qualifying income must be at or below 80% of your area’s median income. The down payment can come from gifts, employer programs, secondary financing, or sweat equity.

How to get a conventional 97 loan

The Conventional 97 mortgage program is available immediately from lenders across the country. Talk with your lenders about the loan requirements today.

The ability to put only 3% down could open doors for you.

Check your eligibility for a 3% down payment conventional mortgage. Start here (Nov 10th, 2026)