What to Know About Conventional 97 Loans

Conventional 97 loans are offered by Fannie Mae and Freddie Mac to help buyers who have been trying to save for a down payment but don’t have a lot of cash reserves.

As the name implies, a Conventional 97 home loan only requires 3% down, leaving a borrower to finance 97% of the loan-to-value (LTV). Your down payment can come from savings, cash on hand, gifts, grants, employer assistance, and other financing programs.

First-time buyers may also be eligible for homebuyer tax credits and local down payment assistance, depending on where they live. The Conventional 97 is available from every mortgage lender that offers conventional financing.

A Conventional 97 loan is similar to an FHA mortgage and is available in all 50 states to homebuyers of all income levels.

Here’s a closer look at what a Conventional 97 home loan is, who qualifies, and how it compares to other programs.

Conventional 97 Requirements

You must be a first-time homebuyer

At least one person on the mortgage application must be a first-time buyer, defined as someone who has not owned any percentage of a residential property in the last 36 months.

You must have a credit score of at least 620

Fannie Mae and Freddie Mac use the FICO credit scoring system, which excludes certain types of debt from consideration, including medical bills and collection activity. The program-level minimum credit score for a Conventional 97 loan is 620. Keep in mind that individual lenders may require higher scores — Refi.com requires a minimum 620 FICO score for conventional loans.

You must move into the home you buy

Conventional 97 loans apply only to primary residences. You can’t use this type of loan for an investment rental property or a second home.

Only 1-unit residential properties are eligible

Only single-family residences, including townhomes and condos, are eligible. Depending on the loan, a manufactured home may also qualify — check with your lender to confirm.

Conventional mortgage guidelines apply

This is a conforming mortgage program, so you’ll need to meet conforming standards, including loan limits, which vary depending on where you want to buy.

Attend a homeownership education class

Fannie Mae requires first-time homebuyers to complete a homeownership education course as part of the loan process to help reduce mortgage default risk.

Types of Conventional 97 Loans

There are several types of Conventional 97 loans available for those who qualify. These are sometimes referred to as Fannie Mae 97 LTV Standard loans — both terms refer to the same program, designed for first-time buyers with no income restrictions and a minimum 620 credit score.

The Conventional 97 is one of several low-down-payment mortgage options available. In some cases, other programs may be a better fit.

For example, Conventional 97 is not a home affordability mortgage like HomeReady and Home Possible — it doesn’t discount mortgage rates or offer reduced mortgage insurance premiums.

HomeReady

HomeReady is a 3% down payment mortgage from Fannie Mae for low- and moderate-income buyers. It features a minimum credit score requirement of 620, along with reduced mortgage interest rates and lower mortgage insurance costs compared to standard conventional loans.

Home Possible

Home Possible is a 3% down payment program from Freddie Mac, similar to HomeReady but with a 660 minimum credit score requirement. Income limits apply unless you’re buying in an underserved area.

Home One

This Freddie Mac program offers a 3% down mortgage with no income limits. It applies only to fixed-rate loans for single-unit, owner-occupied residences.

Other Similar Loan Options

FHA Mortgage

FHA loans backed by the Federal Housing Administration require as little as 3.5% down. There are no income limitations, and you can use FHA financing to buy multi-unit homes.

FHA-insured loans come with mortgage insurance premiums, including an upfront fee and an ongoing monthly premium. Conventional 97 mortgages have monthly or annual mortgage insurance options that can vary by lender.

When it comes to credit, FHA guidelines allow scores as low as 580 for the minimum down payment — lower than the 620 minimum required for a Conventional 97 loan. That said, most lenders, including Refi.com, require a minimum 620 FICO score for FHA loans, so the practical difference is often smaller than it appears on paper.

USDA Mortgage

The USDA loan is a 100% financing option backed by the U.S. Department of Agriculture, available to buyers in low-density areas of the country. It offers subsidized mortgage rates and reduced insurance premiums. USDA guidelines don’t set a hard minimum credit score, but most lenders — including Refi.com — require at least 620 to qualify.

VA Mortgage

VA loans offer 100% financing to active-duty service members, veterans, and surviving spouses, backed by the Department of Veterans Affairs. The VA doesn’t set a minimum credit score, but individual lenders typically do — Refi.com requires a minimum 620 FICO score for VA loans.

Compare Before You Decide

If you’re shopping for a low-down-payment loan, it pays to compare your options. Ask your lender for a side-by-side look at the Conventional 97 alongside programs like HomeReady, Home Possible, and FHA — so you can choose the terms that best fit your situation.

And if you already own a home with a conventional or FHA loan, refinancing could help you lower your rate, eliminate mortgage insurance, or tap your equity as your financial picture improves. See what you qualify for at Refi.com — it only takes a few minutes.