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Conventional 97 Loan

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In order to assist individuals saving up to get a house and who do not have much money, the traditional 97 loan was developed. The required minimum down payment for a conventional 97 loan is 3%. As a result, the loan-to-value ratio, indicated by the number “97” in the title, may reach 97%.

Consider that you intend to buy a home for $200,000 dollars. If you choose a Conventional 97 loan, you can borrow up to $294,000 with only a $6,000 down payment. Your down payment may be covered by your savings, financial assets, investments, incentives, workplace support programs, and other means.

What Is Conventional 97 Loan Program?

Having a loan-to-value (LTV) ratio of up to 97% is allowed with a traditional 97 loan, as the name implies. The advantages of a Conventional 97 mortgage over certain other common loan kinds are clear. They are intended to assist firsttime buyers who do not have access to a lot of cash to get the homes they would like to have.

Compared to some other loans, particularly those that require 10% or 20% down payments of the home’s total worth, this gives these loans a more appealing aspect. It should be obvious that this does not imply that all 97 loans are suitable for everyone. A standard 97 could be perfect for one applicant, even though another borrower might be able to find a more suitable option elsewhere.

How a Conventional 97 Loan Works

A standard 97 loan is one of the least expensive minimal down payment mortgage products. As with all loans, the terms and conditions differ depending on the product and lender. But, there is other essential information about this lending option.

Any first-time home buyer in any income bracket should give it some thought. With a 3% down payment, buyers finance the rest 97% of the loan. The name is a result of the outstanding debt.

The rate on this loan is fixed. This implies that the principal and interest components of your monthly payments remain unaffected during the course of the loan. Up to 80% of the home’s original value has been completely repaid, PMI (private mortgage insurance) is required.

Conventional 97 Loan Terms

There are quite a few factors that borrowers should consider before applying for financing. From loan limits to credit scores, it all matters. Here is a list of some of the terms you might want to look into:

Minimum Down Payment

The Conventional 97 program, which calls for a minimum down payment of 3%, is one that the majority of lenders offer.

Lowest Credit Score Required

The 97 mortgage option can only be used by homebuyers who have a credit score for mortgages of at least 620.

First-Time Buyers

The use of the traditional 97 program is restricted to first-time homeowners. At least one of the names on the mortgage application has to be a first-time buyer.

Income Limitations

There are no loan limits for the standard 97% option. Consequently, high-income first-time homebuyers have an advantage.

Boarder Income

The program allows you to meet the requirements utilizing boarder income, just like the FHA mortgage does.

Homeownership Education

97 loan programs require you to pass a homeownership education course in order to be eligible.

Single-Family Homes

The financing program can be used to fund the single-family residence or apartment units. The home must be used as the buyer’s main residence.

Conventional 97 Credit Requirements

To be qualified for a Conventional 97 mortgage, you must fulfill a number of loan requirements. Based on the program, you need to have a credit score between 620 and 660. But, a higher credit score may enable you to qualify for a new loan with a reduced interest rate.

You need to fulfill specific income requirements set forth by the loan. The prospective owner must intend to use the home as their primary residence. In order to qualify for various Conventional 97 mortgages, at least one home buyer must not have owned a property three years before the application.

The location of the property you seek to purchase may, when applicable, have an impact on the income limits. There is no upper-income limit for the 97% LTV Standard lending program. Therefore, anyone who satisfies the other program requirements may be accepted.

How To Qualify For Conventional 97?

To qualify for a 97 mortgage with a minimal down payment, prospective homeowners must meet a few standards. To determine which loan alternatives are open for you, it is best to seek quotations from a number of lenders. Here are some of the steps you can follow to qualify:

  • Make sure you have the required DTI

 You must first satisfy the minimal debt-to-income (DTI) as well as credit rating standards.  To qualify for a conventional 97 loan, you typically need a DTI calculated by the Automated Underwriting process done by your $500 loan no credit check direct lender

  • Look into your credit rating 

You need a credit score of 620 or higher. If you are having any doubts regarding credit scores, you can seek professional consultations in order to fix it.

  • Look into income restrictions

Certain programs also have income limits, requiring borrowers to earn no more than a specific amount. But there are quite a few possibilities out there where you will not have an income limit as a requirement.

  • Work with a loan officer

Along with the rules previously established, creditors can set their own criteria, so some may be more demanding than others. Make sure to reach out to different lenders and officers to make the best choice. 

  • Apply

Gather the required documentation and start your application process!

Conventional 97% vs HomeReady

Conventional 97% vs HomeReady

A conventional mortgage loan known as “Conventional 97” permits a maximum loan-to-value of 97 percent.  This is the opposite of HomeReady, which allows three percent down but Fannie Mae and Freddie Mac only offer loans to medium or low-income households.

The Conventional 97 has no income restrictions. ADU income is not accepted with standard 97, whereas HomeReady allows it. However, they both accept boarder income.

In contrast to 97 loans, HomeReady permits multi-unit homes. Both have the same minimum credit scores of 620. Additionally, they demand homeownership education.

Conventional 97% vs FHA

You must evaluate the advantages and disadvantages of both conventional mortgage loans and FHA loans according to your own financial situation.  If you have strong or outstanding credit, a conventional loan is typically favorable because your mortgage interest rate and PMI fees will decrease. An FHA loan could be a better option if your credit score is 500 or even up to 600. 

FHA is frequently the less expensive choice for consumers with bad credit. For conventional loans, the down payment requirement is 3%, while it is 3.5% for FHA mortgage. For either of the options, there are no income constraints. FHA does, however, charge an upfront fee as well as an annual fee.

The FHA mortgage is the best choice for you if your credit score is from 500 to 620 since you have no other possibilities. Although, it may be worthwhile to investigate a traditional borrowing option with 3% down if your credit score is higher than 620. Particularly because your mortgage rate and PMI charges decrease as your credit score increases.


Homebuyers nowadays have many low-down payment possibilities. The Conventional 97 mortgage was created as a loan substitute. This expands the options available to potential customers when selecting a mortgage lender.

With a conventional 97 loan, you can obtain a mortgage with a loan-to-value ratio of up to 97%. Make sure to speak with a professional and consider other options if you are uncertain if this is the best course of action for you. There are undoubtedly advantages and disadvantages, but ultimately, the process is entirely individual.


Is a conventional 97 loan risky?

No, if you act responsibly, there are generally no issues this possibility can cause you. However, it is certainly not for everyone. Consider your personal situation and what might be most suitable before you decide anything.

What is the minimum down payment for a conventional 97 loan?

The minimum down payment is 3%. But, if you have a bad credit score and still get approved, you might have to pay more than just 3%.

Is a conventional 97 loan good?

Yes, if you qualify for it and follow all of the requirements, a conventional loan is a good choice.  Bear in mind that it might not be the best possible solution for your own situation.

How long does it take to get approved for a conventional 97 loan?

This is purely individual and depends on your lender as well. The application process can be lengthy for some and quicker for others.

Is a conventional 97 loan more expensive?

Depending on additional fees, your credit score, and your income, a conventional 97 might be more expensive for you. However, this is not necessarily the case, especially as the down payment is so low.

Do you need proof of income for a conventional 97 loan?

Yes, all lenders will ask for proof of income before giving you money. This can be a bank statement, paycheck, pay stubs, and so on.

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