What is the Conventional 97 Loan Program and How Does it Work?


Get a Rate Quote! Start Now

You may have heard about an FHA loan, which has a 3.5% minimum down payment (if not, check out our “What is an FHA Loan?”).

But, have you heard of the Conventional 97 Loan Program with only 3% down?

If you qualify for conventional mortgage pricing only to find yourself strapped for cash, or you want to hold back some cash you would normally allocate for your down payment for something like home improvements or moving costs, the Conventional 97% Loan Program offered by Freddie Mac®️ (or the Fannie 97®️ offered by FANNIE MAE®️) may be able to help.

How Does a Conventional 97 Loan Program Work?

With this mortgage program, you finance 97% of the price of the home and only put 3% down. However, Private Mortgage Insurance (or PMI) will be necessary.  PMI is insurance a borrower pays on their loan to reduce the risk of loss to the lender in case the borrower defaults on their mortgage payment.

With the conventional 97 loan program, PMI doesn’t stay for the entire life of the loan. It typically cancels once you’ve paid a certain amount of the original purchase price.  You may even be eligible to drop the mortgage insurance sooner using the current appraised value.

Who Qualifies for a Conventional 97 Loan Program?

To take advantage of the conventional 97 loan program, the borrower may need to be a first time home buyer, though not in all instances.

If there are two borrowers on the mortgage application at least one of them must qualify as a first-time home buyer and have not owned a home within the last 36 months.

Always speak with an experienced mortgage loan originator so you can discuss the option that is best suited for you – and really challenge them on what is available to meet your needs, whether it is a low down payment, a maximum monthly mortgage amount for your budget, or both.