Conventional 97% LTV Loan - 3% Down Payment Mortgage

Conventional 97 loan with 3% down


Borrowers looking to buy a house, particularly their first home, typically need a loan program that offers as little down as possible.

The Conventional 97 loan, 3% down mortgage, specifically helps with just that.

Traditionally, Conventional loan down payments required 5% down or 95% LTV, but the Fannie Mae Conventional 97% LTV option reduces that requirement.

Conventional loan programs offer two 97% LTV options: Standard 97 LTV loan and the HomeReady 3% Down program.

Our article will highlight the benefits of both programs but also give some insight as to other programs that may be equally (or more) beneficial.


Conventional Mortgage Series:

Other Helpful Resources:


Standard 97 Conventional Fannie Mae Loan

The Standard 97 Conventional Loan is exclusively for first time home buyers.

  • Definition of a “First-Time Buyer” is a borrower that has not had ownership of a residential property in the last 3 years (can’t be on title or the mortgage within the last 3 years).

Read more about first-time home buyer qualifications if you want to find out if you qualify.


Conventional 97 Loan Benefits


Standard 97 LTV Requirements

  • Qualifying first-time buyer
  • Purchasing your primary residence
  • Down payment can be from a gift
  • Debt-to-income ratio cannot exceed 50% of gross monthly income
  • Minimum 620 credit score requirement
  • Maximum loan to value at 97%
  • Property must be a single-family home, townhome, or eligible condo
  • Maximum loan amount of $484,350 for 2019


HomeReady 3% Down, 97 LTV

The HomeReady 97 LTV loan offers additional benefits over the Standard Conventional 97 Loan just mentioned.

This program is not exclusive to first-time buyers, but instead focuses more on low-to-moderate income families.


HomeReady 97 Loan Benefits

  • Reduced Interest rates compared to Standard 97 Loan
  • Reduced Mortgage Insurance
  • DO NOT have to be a first-time buyer


HomeReady 3% Down Requirements

  • Purchasing a primary residence
  • Specific income limits capped at Area Median Income (AMI) in most areas or in low census-tract areas no income restrictions
  • 97% LTV, 3% down
  • Minimum 620 credit score
  • Down payment can be from a gift
  • First-time homebuyer counseling course required
  • Maximum debt-to-income ratio of 50%
  • Property must be a single-family home, townhome or eligible condo
  • Max loan amount of $484,350 in 2019


Conventional 97 Loan vs FHA Loan

Our team at United Fidelity Funding wrote a comprehensive FHA vs Conventional loan comparison included with an infographic, so read that for additional insight. However, here are a few brief comparisons.

FHA Loan Benefits Compared to Conventional 97

  • FHA offers lower rates, particularly for borrowers with credit scores under 700 credit
  • Lower mortgage insurance premiums. Conventional Loan PMI is based on credit scores and how much you put down, whereas FHA’s is fixed based on your loan amount.
  • FHA Loan Requirements are easier to qualify for and allow for higher debt-to-income ratios
  • Lower minimum credit guidelines (580 in most cases)
  • Sellers can contribute up to 6% of the purchase price towards closing costs (the Conventional 97 loan only allows the seller to contribute 3%)
  • No income limits
  • No first-time buyer course requirements
  • Do not have to be a first-time buyer


Conventional 97 Loan Benefits Compared to FHA

  • Lower down payment: 3% down required for Conventional 97 and 3.5% down for FHA
  • No additional upfront mortgage insurance like FHA requires
  • Cancellable mortgage insurance – PMI falls off once you get to 78% loan-to-value (approximately 9 years)
  • Higher maximum loan amounts


The Conventional 97 LTV Loan and HomeReady 3% Down loan are great options for borrowers with excellent credit or looking to borrow more than the $314,000 FHA limit. Since Conventional loans are credit sensitive, borrowers with lower scores may be better suited financially looking at other options.

For a full comparison of home loan options, read our complete breakdown to get a better idea of which may be best for you.


Compare Conventional 97 Loan Options