This BLOG On 97 LTV Conventional Loan Mortgage Guidelines And Requirements Was UPDATED And PUBLISHED On August, 20th, 2019
97 LTV Conventional Loan Program Is Back:
Fannie Mae and Freddie Mac have just released news that they will bring the 97 Conventional Loan program back. The 97 Conventional Loan program enables qualified home buyers to purchase a home with a 3% down payment versus the current 5% down payment required.
- The 97 LTV Conventional Loan program was available prior to 2014
- It was discontinued on January 1, 2014
- This is great news for homebuyers with good credit and who qualify for a conventional loan but lack the resources for the down payment
- This is a great sign that the two mortgage giants, Fannie Mae, and Freddie Mac, want to promote homeownership for Americans
- This is a sign that they want to expand credit for folks who want to be homeowners
- Back in October of 2014, FHA released a statement that was finalizing agreements with lenders that would drastically increase and loosen credit qualifications required by borrowers and giving lenders added protection on their assets
Fannie Mae and Freddie Mac followed HUD’s lead in competing with promoting homeownership with the resurgence of the 97 Conventional Loan Program.
3% Down Payment To Qualify For 97 LTV Conventional Loan
The surprising announcement released by Fannie Mae and Freddie Mac now will give the opportunity for homebuyers who qualify for a conventional loan
- 97% Conventional Loan program is ideal for homebuyers who afford the mortgage payments and housing expenses but lack the needed 5% down payment
- Now they can have an opportunity to purchase a home and to be able to only put a 3% down payment to qualify for a 97 LTV Conventional Loan
- The 3.0% down payment requirement for the conventional loan is lower than the 3.5% down payment required for an FHA Loan
The 0.50% reduction in a down payment required on a home purchase can be a significant amount, especially on higher-priced homes.
FANNIE MAE 97 LTV Conventional Loan Qualification Requirements
To qualify for the 3% down payment, 97 LTV Conventional Loan program, it is no different than the 5% down payment 95% LTV Conventional Loan program.
The 97 LTV Conventional Loan borrowers need to qualify for the standard Fannie Mae and/or Freddie Mac lending guidelines with regards to eligibility requirements such as the following:
- debt to income ratios
- waiting periods after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
- as well as overall credit risk
97 LTV Conventional Loan Guidelines
Many home buyers who can qualify for conventional loans currently opt for an FHA loan with the 0.85% hefty FHA MIP. This is due to the lower down payment requirements of 3.5% down payment for an FHA loan versus to the current 5% down payment requirement for Conventional Loans.
- All FHA loan requires the mandatory FHA mortgage insurance premium for the term of the loan
- The 0,85% annual mortgage insurance premium is for the term of 30-year fixed-rate FHA mortgages
- FHA also requires a one time upfront 1.75% FHA mortgage insurance premium which is normally rolled into the FHA loan balance
- Any conventional mortgage loan with 80% Loan to Value or higher require private mortgage insurance
- However, conventional private mortgage insurance can be a fraction of the FHA mortgage insurance premium for higher credit score borrowers
- Private mortgage insurance on conforming loans can be canceled once your property reaches the 80% LTV level
- Now homebuyers who qualify for conventional loans can now qualify with 3% down payment
This is lower than the 3.5% down payment required for FHA Loans.
Conventional Loan Requirements
To qualify for a conventional loan, borrowers need the following:
- Need a 620 credit score
- Debt to income ratios are capped at 50% DTI
- There is a mandatory waiting period of 4 years after a bankruptcy, deed in lieu of foreclosure, and short sale
- There is a 7 year mandatory waiting period after a foreclosure
- Need to have been timely on payments in the past 12 months
- Need an approve/eligible per DU FINDINGS and/or LP FINDINGS per Automated Underwriting System
August 20, 2019 - 4 min read