For many first-time homebuyers, the biggest obstacle to owning a home isn’t the monthly payment — it’s saving up for the down payment. That’s where the Conventional 97 Loan comes in. Backed by Fannie Mae and Freddie Mac, this low down payment mortgage option allows qualified buyers to purchase a home with as little as 3% down, making homeownership more accessible than ever.
What Is a Conventional 97 Loan?
The Conventional 97 Loan is a mortgage program designed for first-time buyers who can’t afford a large down payment. The “97” refers to the loan-to-value (LTV) ratio — borrowers can finance up to 97% of the home’s value, putting down just 3%.
It’s a conventional loan, meaning it’s not government-backed like FHA, VA, or USDA loans. Instead, it follows lending standards set by Fannie Mae and Freddie Mac, the two major government-sponsored enterprises (GSEs).
Key Features of Conventional 97 Loans
- 3% down payment — one of the lowest available for conventional loans
- Fixed-rate mortgage — 30-year fixed terms are common
- First-time homebuyer friendly — at least one borrower must be a first-time buyer (hasn’t owned a home in the last 3 years)
- Primary residence only — can’t be used for second homes or investment properties
- Private Mortgage Insurance (PMI) required — but can be canceled once you reach 20% equity (unlike FHA loans, which require MIP for the life of the loan)
- Loan limits — must conform to standard loan limits set by the FHFA ($766,550 in most areas for 2024; higher in some high-cost markets)
Conventional 97 vs FHA Loan
Feature | Conventional 97 | FHA Loan |
| Minimum Down Payment | 3% | 3.5% |
| Credit Score Requirement | 620+ | 580+ (with 3.5% down) |
| Mortgage Insurance | PMI, can be removed at 20% equity | MIP required for the life of the loan |
| Property Type | Primary residence only | Primary residence only |
| Loan Type | Conventional (Fannie Mae/Freddie Mac) | Government-backed |
| Ideal For | First-time buyers with decent credit | Buyers with lower credit scores or smaller savings |
Choose Conventional 97 if you have solid credit and want the ability to cancel PMI in the future.
Choose FHA if your credit score is lower or your debt-to-income ratio is higher.
→ Read more: Government Programs for First Time Home Buyers
Benefits of Conventional 97 Loans
- Lower upfront cost – only 3% down makes it easier to buy sooner.
- Build equity faster compared to FHA (since PMI can be canceled).
- Flexibility – down payment can come from savings, gifts, or grants.
- Accessibility – ideal for first-time buyers who meet credit requirements.
Who Qualifies for Conventional 97 Loans?
.jpg "3% Down Conventional 97 Loan | Affordable Path for First-Time Buyers")
- At least one borrower must be a first-time homebuyer (no homeownership in the last 3 years).
- Credit score of 620 or higher (higher scores get better rates).
- Debt-to-income ratio (DTI) typically below 43–50%, depending on lender.
- Must use the loan for a primary residence (1-unit property).
- Loan must be within conforming loan limits.
Things to Consider
- PMI (Private Mortgage Insurance) will be required until you reach 20% equity.
- Higher credit score needed compared to FHA.
- Not available for multi-unit homes, vacation homes, or investment properties.
- Slightly stricter underwriting than FHA or VA loans.
→ Read more: Apply for a Home Loan as a First-Time Buyer: Step-by-Step Guide
Why Choose Loan Factory for Conventional 97 Loans?
At Loan Factory, we make low down payment mortgages simple and affordable:
- Technology Advantage (MOSO) – Instantly compare rates from 240+ lenders.
- Best Price Guarantee – If we can’t beat a competitor’s official offer, we’ll pay you $1,000 check (term)
- Transparent Process – No junk fees, no surprises — just clear savings.
- Expert Guidance – Our loan officers specialize in helping first-time buyers qualify for Conventional 97 loans.
Ready to buy a home with just 3% down? Start your Conventional 97 Loan with Loan Factory today.
FAQ: Conventional 97 Loans
