What Is a Conventional 97 Loan? A Low Down Payment Option

For many first-time homebuyers, saving for a large down payment can feel overwhelming. The good news? With a Conventional 97 loan, you may be able to buy a home with as little as 3% down. This program, backed by Fannie Mae and Freddie Mac, makes homeownership more accessible without requiring you to put down the traditional 20%.

At ALCOVA Mortgage, we’re here to break down what a Conventional 97 loan is, how it works, and whether it might be the right choice for your homeownership journey.

How Does a Conventional 97 Loan Work?

The term “97” refers to the 97% loan-to-value (LTV) ratio—meaning you can borrow up to 97% of a home’s purchase price while contributing just 3% as a down payment.

For example:

• Home price: $250,000
• Down payment (3%): $7,500
• Loan amount (97%): $242,500

This program is designed for qualified buyers who want the flexibility of a conventional loan with a smaller upfront cost.

Key Benefits of a Conventional 97 Loan

• Low Down Payment – Put down just 3% instead of the typical 5–20%.
• Fixed-Rate Options – Enjoy predictable monthly payments with a 30-year fixed-rate mortgage.
• Conventional Loan Advantages – Unlike FHA loans, conventional loans don’t come with upfront mortgage insurance premiums.
• Cancel Mortgage Insurance – Once you reach 20% equity, you may be able to remove private mortgage insurance (PMI), reducing your monthly payments.

Who Is Eligible for a Conventional 97 Loan?

To qualify, borrowers generally need to meet these requirements:

• First-time homebuyer status – At least one borrower must not have owned a home in the last three years.
• Credit score – A minimum score of around 620 is often required, though stronger credit may secure better rates.
• Primary residence – The home must be a one-unit primary residence (single-family home, condo, or townhouse).
• Income and debt ratios – Borrowers must meet standard conventional loan guidelines.

Conventional 97 vs. FHA: What’s the Difference?

Many buyers compare Conventional 97 loans with FHA loans, since both allow for low down payments. Here are some key distinctions:

• Down Payment: FHA requires at least 3.5%, while Conventional 97 requires 3%.
• Mortgage Insurance: FHA mortgage insurance is required for the life of the loan, while PMI on a Conventional 97 can be canceled.
• Flexibility: Conventional 97 loans may offer more competitive rates for borrowers with higher credit scores.

You can explore more about the differences in loan options on our Loan Options page.

Is a Conventional 97 Loan Right for You?

A Conventional 97 loan can be a powerful tool for first-time buyers who want to purchase sooner without waiting years to save up a large down payment. However, it’s important to review your credit profile, long-term financial goals, and eligibility.

Our team at ALCOVA is here to walk you through your options and help you decide whether a Conventional 97 loan, FHA loan, or another mortgage program is the best fit.

Take the Next Step Toward Homeownership

Ready to see if you qualify? ALCOVA Mortgage makes it simple to start the process.

• Learn more about buying your first home.
• Get started with our online mortgage application.
• Connect with a local loan officer today to discuss your options.

Homeownership may be closer than you think—sometimes just 3% away!