A Conventional 97 loan is the common name for Fannie Mae’s standard 97% loan-to-value purchase option. It allows eligible borrowers to buy a one-unit primary residence with a down payment of at least 3%.
The option has no specific income limit. However, it has first-time home buyer, property, underwriting and mortgage insurance requirements. Other 3%-down conventional options, including HomeReady, Home Possible and HomeOne, use different eligibility rules.
Conventional 97 Basics
| Requirement |
Conventional 97 Guideline |
| Minimum down payment |
3% |
| Maximum loan-to-value ratio |
97% |
| Occupancy |
Primary residence |
| Eligible property |
One-unit property that meets conventional eligibility requirements |
| Loan type |
Fixed-rate mortgage with a term of up to 30 years |
| First-time buyer requirement |
At least one borrower generally must qualify as a first-time home buyer for a standard 97% LTV purchase |
| Income limit |
No program-specific income limit |
| Underwriting |
Must meet Fannie Mae underwriting and eligibility requirements |
| Mortgage insurance |
Private mortgage insurance is required when the loan closes above 80% LTV |
How Does a Conventional 97 Loan Work?
The number 97 refers to the maximum percentage of the property value that the mortgage can finance. You provide the remaining 3% as a down payment.
For example, a 3% down payment on a $350,000 home is $10,500:
| Purchase Detail |
Amount |
| Home price |
$350,000 |
| Down payment at 3% |
$10,500 |
| Starting loan amount |
$339,500 |
The down payment is only one part of the cash needed to buy a home. You may also need funds for closing costs, prepaid property taxes, homeowners insurance and other transaction expenses.
Eligible gift funds, grants and down payment assistance may be used when the transaction meets Fannie Mae and lender requirements.
Who Is Considered a First-Time Home Buyer?
For this option, a first-time home buyer generally includes someone who has not had an ownership interest in a principal residence during the three years before the new home purchase.
This definition means you could qualify as a first-time buyer even if you owned a home earlier in your life. At least one borrower generally must meet the definition for a standard Conventional 97 purchase transaction.
Conventional 97 Eligibility Requirements
You Must Buy a Primary Residence
The home must serve as your principal residence. Conventional 97 is not intended for an investment property or second home.
The Property Must Have One Unit
The standard option applies to eligible one-unit properties. These can include detached homes, townhouses and eligible condominium units.
A condominium project must meet applicable conventional eligibility requirements. A unit in an ineligible project may require another financing approach. Learn more about non-warrantable condo financing.
The Loan Must Receive Required Underwriting Approval
Your income, employment, assets, credit history, debts and property information must satisfy conventional underwriting requirements.
Fannie Mae does not establish a single credit score that guarantees approval for every Conventional 97 application. The result depends on the entire loan file, the applicable underwriting requirements and any additional lender standards.
Homeownership Education May Be Required
Homeownership education is generally required when all occupying borrowers are first-time home buyers and the loan-to-value ratio is greater than 95%.
The education course must meet applicable Fannie Mae requirements and generally must be completed before closing.
Does Conventional 97 Have an Income Limit?
Fannie Mae’s standard 97% LTV option does not have a program-specific income limit.
Your income must still be sufficient and properly documented for underwriting. The lender evaluates your qualifying income along with your debts, proposed housing payment, credit profile and other risk factors.
Income limits do apply to certain other 3%-down programs. HomeReady and Home Possible generally limit qualifying income based on the area median income for the property’s location.
2026 Conventional 97 Loan Limits
A Conventional 97 mortgage must remain within the applicable conforming loan limit.
The 2026 baseline conforming loan limit for a one-unit property is $832,750. The national ceiling for a one-unit property in the highest-cost areas is $1,249,125.
Some high-cost counties have limits between the baseline and national ceiling. Special statutory limits also apply in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
Because the mortgage can cover up to 97% of the purchase price, the 2026 baseline loan limit could support a purchase price of about $858,500 with 3% down. Your actual maximum depends on the county loan limit, your finances, the property and underwriting approval.
How Private Mortgage Insurance Works
A Conventional 97 loan begins with private mortgage insurance because the initial loan-to-value ratio is greater than 80%.
Private mortgage insurance protects the mortgage holder against part of the loss if the borrower defaults. It does not protect the borrower from foreclosure or missed-payment consequences.
The cost depends on factors such as your credit profile, loan-to-value ratio, coverage requirements and mortgage insurance provider. It can be charged monthly, paid through another permitted structure or incorporated into the loan pricing, depending on the transaction.
Under federal law, you generally have the right to request PMI cancellation when the scheduled principal balance reaches 80% of the home’s original value. You must meet applicable requirements, which can include having a satisfactory payment history and showing that the property has not declined in value.
PMI generally terminates automatically when the scheduled balance reaches 78% of the original value, provided the loan is current and other legal conditions are met. Review PMI requirements by loan type for more information.
Conventional 97 vs. Other 3%-Down Conventional Loans
Conventional 97 is one of several conventional options that can permit a 3% down payment. The programs use different income, first-time buyer and property requirements.
| Option |
Enterprise |
Income Limit |
First-Time Buyer Rule |
General Distinction |
| Standard 97% LTV option |
Fannie Mae |
No program-specific limit |
At least one borrower generally must be a first-time buyer for a purchase |
One-unit primary-residence purchase option commonly called Conventional 97 |
| HomeReady |
Fannie Mae |
Generally limited to 80% of area median income |
No general first-time buyer requirement |
Affordable-lending option with separate income, property and mortgage insurance rules |
| Home Possible |
Freddie Mac |
Generally limited to 80% of area median income |
No general first-time buyer requirement |
Freddie Mac affordable-lending option with its own underwriting requirements |
| HomeOne |
Freddie Mac |
No program-specific limit |
At least one borrower must generally be a first-time buyer for a purchase |
3%-down option without geographic or income restrictions |
The table summarizes major distinctions. Each option has additional rules for underwriting, property eligibility, mortgage insurance, education and sources of funds.
Conventional 97 vs. FHA, VA and USDA Loans
| Loan Type |
Minimum Down Payment |
Mortgage Insurance or Fee |
Major Eligibility Consideration |
| Conventional 97 |
3% |
Private mortgage insurance at more than 80% LTV |
Conventional underwriting and first-time buyer rules |
| FHA loan |
3.5% with an eligible credit score |
Upfront and annual mortgage insurance premiums |
FHA borrower, property and appraisal requirements |
| VA loan |
No down payment required in eligible transactions |
No monthly mortgage insurance; a funding fee can apply |
VA eligibility and available VA loan entitlement |
| USDA loan |
No down payment required in eligible transactions |
Upfront and annual guarantee fees for a guaranteed loan |
Household income, property location and USDA eligibility rules |
A smaller down payment does not determine which loan has the lowest overall cost. Compare the interest rate, mortgage insurance or guarantee fees, closing costs, monthly payment and long-term cost of each eligible option.
Advantages of a Conventional 97 Loan
- The minimum down payment is 3%.
- The standard option does not impose a program-specific income limit.
- Eligible gifts, grants and assistance may be used toward funds needed to close.
- PMI may be canceled or terminated when applicable requirements are satisfied.
- The loan uses a conventional mortgage structure rather than FHA mortgage insurance.
Limitations of a Conventional 97 Loan
- The standard purchase option generally requires at least one first-time home buyer.
- The property must be an eligible one-unit primary residence.
- PMI increases the cost while it remains in effect.
- A 3% down payment creates less initial equity than a larger down payment.
- A larger loan balance generally produces a higher monthly principal-and-interest payment.
- The loan amount cannot exceed the applicable conforming loan limit.
Bottom Line
A Conventional 97 loan allows eligible buyers to purchase a one-unit primary residence with 3% down and no program-specific income limit. At least one borrower generally must be a first-time home buyer, and the loan must satisfy conventional underwriting, property and mortgage insurance requirements.
Compare it with HomeReady, Home Possible, HomeOne and any government-backed loans for which you qualify. The most relevant comparison is the total monthly payment, cash needed at closing and cost over the period you expect to keep the loan.
FAQ
Who Qualifies for a Conventional 97 Loan?
Eligibility generally requires a purchase of an eligible one-unit primary residence, a down payment of at least 3% and approval under applicable conventional underwriting requirements. At least one borrower generally must qualify as a first-time home buyer for the standard purchase option.
Is Conventional 97 Only for First-Time Home Buyers?
The standard 97% LTV purchase option generally requires at least one borrower to be a first-time home buyer. Other borrowers on the same loan do not necessarily have to meet the definition.
Does Conventional 97 Have an Income Limit?
No program-specific income limit applies to Fannie Mae’s standard 97% LTV option. Your documented qualifying income must still support the mortgage under applicable underwriting requirements.
What Credit Score Do You Need for a Conventional 97 Loan?
There is no single score that guarantees approval for every application. Eligibility and pricing depend on the full loan file, including credit history, debts, income, assets, loan characteristics and lender requirements.
What Is the Maximum Conventional 97 Loan Amount in 2026?
The loan must remain within the applicable conforming loan limit. The 2026 one-unit baseline is $832,750, while the national ceiling in the highest-cost areas is $1,249,125. County limits can vary.
Can Gift Funds Cover the 3% Down Payment?
Gift funds may cover some or all of the down payment on an eligible one-unit primary-residence transaction when the gift and donor satisfy applicable documentation requirements. Grants and eligible down payment assistance may also be permitted.
Can You Use a Conventional 97 Loan for a Condo?
Yes, an eligible one-unit condominium may qualify. The borrower, unit and condominium project must meet applicable conventional requirements.
Can You Use Conventional 97 for an Investment Property?
No. The standard Conventional 97 purchase option is limited to a primary residence.
Can PMI Be Removed From a Conventional 97 Loan?
Yes, federal law generally allows a borrower to request PMI cancellation when the scheduled balance reaches 80% of the home’s original value and applicable conditions are met. PMI generally terminates automatically at 78% when the loan is current and other legal requirements are satisfied.
How Is Conventional 97 Different From an FHA Loan?
Conventional 97 uses conventional underwriting and private mortgage insurance. An FHA loan follows HUD requirements and uses upfront and annual FHA mortgage insurance premiums. FHA and conventional loans also differ in their credit, property, appraisal and mortgage insurance rules.
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