Years ago during the real estate boom, 97% Conventional loan financing was readily available for first time home buyers and the programs weren’t so exclusive. Many mortgage lenders were even offering 100% financing mortgages which worked quite well at the time. Then things started to change. The mortgage industry experienced a downturn in foreclosures and tougher lending regulations seemed to end most of these mortgage programs. But things changing in 2019 as the housing markets continue to recover.
97% Conventional Mortgage Financing has made a recent comeback by Fannie Mae, through My Community Mortgage product and for a standard non-MCM Conventional Loan Product. These programs are meant to help first-time homebuyers who may not have the resources for a larger down payment, the program allows them to receive loans requiring little down payment. It is also great for homeowners whose homes have lost value since purchase but who are otherwise ineligible for the Home Affordable Refinance Program (HARP).
This program makes mortgages more accessible, sustainable and affordable. Fannie Mae offers guidelines and tools that enhance the benefits of 97% Conventional Mortgage Financing. The flexibilities inherent to the program are what distinguish it from other conventional mortgage financing options in the market.
97% Conventional Mortgage Highlights
- The program provides a Maximum loan to value (LTV), Combined Loan to Value (CLTV), and High or Home Equity Combined Loan to Value (HCLTV) is 97%.
- Manufactured homes are not eligible for 97% LTV loans.
- Cash gifts may be used for down payments and reserves.
- It limits the upfront monthly costs of mortgages.
- It supports the long-term success of buyers.
- Private Mortgage Insurance (PMI) cancels when the loan reaches 80% LTV.
97% Conventional LTV Home Buying Requirements
- Only 30-year fixed rate mortgages are allowed.
- Only available for low to moderate income families.
- The program requires a minimum of 3% down payment.
- May require homebuyer education prior to loan closings.
- Borrowers are required to pay Private Mortgage Insurance (PMI).
- At least one of the borrowers on the loan must be a first time home buyer.
- The loan must be used for a 1 unit primary residence (including Condos and PUDs).
- No second home or investment type purchases.
- Applicants must score must be greater than 640 to qualify.
Other than these features, 97% conventional mortgage financing is quite similar to other conventional mortgage types. But because 97 % conventional mortgage insurance goes away at 80% LTV, it can become a better value over time, especially if you have high credit scores. The higher your credit scores, the cheaper 97% conventional mortgage funding will be. You can check your eligibility for the 97% conventional program and buy your dream home with a down payment of just 3%.
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