Are you consider with Just 3% Downing buying a home but feel overwhelmed by the substantial down payments required? If saving up a significant down payment is a barrier, a Conventional 97 home loan might be an excellent solution to consider. This type of loan allows you to make a down payment as low as 3%, making it an attractive option for those looking to break into homeownership without a hefty upfront investment.

What is a Conventional 97 Home Loan?

A Conventional 97 loan is a mortgage option provided by Fannie Mae and Freddie Mac designed to help more people become homeowners. The “97” represents the loan-to-value (LTV) percentage, meaning you borrow 97% of the home’s value and pay only 3% down. For instance, if you’re aiming to purchase a home priced at $150,000, your down payment would be just $4,500.

Key Features of Conventional 97 Loans

• Low Down Payment: As mentioned, this loan requires only a 3% down payment.
• Flexible Funding Sources: Your down payment can come from savings, gifts, grants, employer-assistance programs, or even community seconds mortgage funds.
• Private Mortgage Insurance (PMI) Required: Like many low down payment loans, you’ll need to budget for PMI until you’ve built sufficient equity in your home (typically when your LTV reaches 80%).

Types of Conventional 97 Loans

1. Fannie Mae HomeReady Loan: This is targeted at lower-income homebuyers with credit scores of at least 620. It requires mortgage insurance, which can be canceled once equity reaches 20%. Income limits apply, and homebuyer education is mandatory.
2. Fannie Mae 97% LTV Standard: Aimed at first-time buyers without income restrictions. It requires a minimum credit score of 620 and includes mandatory mortgage insurance.
3. Freddie Mac Home Possible Loan: Designed for low-to-moderate income borrowers with a minimum credit score of 660, offering down payments as low as 3%. Income caps apply unless the property is in an underserved area.
4. Freddie Mac Home One: Available to first-time homebuyers without income limits. Requires completion of a homebuyer education course and is limited to fixed-rate loans for single-unit, owner-occupied residences.

Eligibility Criteria for a Conventional 97 Loan

• Credit Score: You need a minimum credit score of 620 or 660, depending on the loan type.
• Income Limits: Some programs have income limits that may vary by the location of the property.
• Primary Residence: You must live in the property as your primary residence.
• Homebuyer Education: Typically required, especially for first-time homebuyers.

How Do Conventional 97 Loans Compare to Other Mortgages?

• FHA Loans: Require a minimum down payment of 3.5% but include upfront and monthly mortgage insurance premiums.
• Traditional Conventional Loans: Often require higher down payments but may offer more flexibility in terms of property type and fewer restrictions.

Next Steps

If a Conventional 97 home loan sounds like it might be right for you, start by comparing lenders that offer this type of financing. Ask for detailed comparisons between Conventional 97 loans, FHA loans, and other mortgage options available to you. Understanding all your options will help you make the most informed decision for your financial future.

Ready to explore your possibilities with a Conventional 97 loan? Contact lenders who offer these programs and discuss your situation. The right mortgage can make all the difference in achieving your homeownership dreams.