Gustan Cho The Mortgage Expert,
Publish On: March 18, 2024
This guide covers the 97 LTV conventional loan mortgage guidelines for first-time homebuyers. Fannie Mae and Freddie Mac 97 LTV conventional loan program is back: Fannie Mae and Freddie Mac have just released news that they will bring the 97 LTV conventional loan program back. The 97 LTV 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.
The 97 LTV conventional loan program is great news for homebuyers with good credit and who qualify for a conventional loan but lack the resources for the down payment.
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.
Fannie Mae 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 first-time homebuyers 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.
Relaunching the 97 LTV conventional loan program is a great sign that the two mortgage giants, Fannie Mae, and Freddie Mac, want to promote homeownership for Americans. The 97 LTV conventional loan program is a sign Fannie Mae and Freddie Mac want to expand credit for folks who want to be homeowners. Click here to qualify for 97 LTV conventional loan
How Does Fannie Mae’s 97 LTV Conventional Loan Program Work
Fannie Mae’s 97% Loan-to-Value (LTV) conventional loan program allows homebuyers to obtain a mortgage with just a 3% down payment. In the following paragraphs, we will cover the key guidelines and requirements for Fannie Mae 97 LTV conventional loan program for first-time homebuyers. Down Payment requirements on conventional loans for fist-time homebuyers: The minimum down payment is 3%. This can come from the borrower’s funds, relatives’ gifts, grants, or a down payment assistance program.
FHFA Conforming Loan Limits
The 97% LTV option is available for one-unit principal residences with conventional loan limits set by the Federal Housing Finance Agency (FHFA). In 2024, the baseline conforming limit is $766.550 in regular median home priced areas and $1,149,825 in high-balance high cost areas..
Fannie Mae Private Mortgage Insurance (PMI) Guidelines
Because the down payment is less than 20%, borrowers must pay PMI. This protects the lender in case of default.
Fannie Mae Credit Score Guidelines
A minimum credit score of 620 is typically required for the 97% LTV program.
Conforming Loan Income Limits
No specific income limits exist, but lenders will assess the borrower’s debt-to-income ratio and ability to repay the loan.
Homebuyer Education
If there are more than one borrower and all first-time homebuyers, at least one borrower must complete a homeownership education course.
Fannie Mae Guidelines on Property Types
1-unit single-family homes, approved condos, planned unit developments (PUDs), and some manufactured homes are eligible.
- Occupancy: The borrower must make the property a primary residence.
- Qualifying Ratios: Debt-to-income (DTI) ratios must meet standard Fannie Mae guidelines, usually around 43-45% maximum.
The 97% LTV program aims to make homeownership more accessible for those with limited savings for a down payment. However, lenders will still thoroughly evaluate factors like credit, income stability, and ability to repay the mortgage.
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 or Freddie Mac lending guidelines with regards to eligibility requirements such as the following:
- credit
- income
- debt to income ratios
- waiting periods after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
- as well as overall credit risk
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 Guidelines
Many homebuyers 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 0,55% annual mortgage insurance premium is for the term of 30-year fixed-rate FHA mortgages
HUD 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 cancelled 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. Click here to get more about 97 LTV conventional loan guidelines
Fannie Mae 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
Frequently Asked Questions (FAQ) About
1. What is the Fannie Mae and Freddie Mac 97 LTV conventional loan program? Qualified first-time homebuyers can buy a house with a 3% down payment instead of the usual 5% required for conventional loans through the 97 LTV conventional loan program.
2. Who qualifies for the 97 LTV conventional loan program? Homebuyers with good credit who meet the eligibility requirements for a conventional loan but lack the resources for a larger down payment can qualify for this program.
3. When was the 97 LTV conventional loan program reintroduced? Fannie Mae and Freddie Mac announced the reintroduction of the 97 LTV conventional loan program, which was previously available before 2014 but was discontinued. The announcement was made recently, offering new opportunities for homebuyers.
4. What are the key guidelines and requirements for the Fannie Mae 97 LTV conventional loan program? Key guidelines for the Fannie Mae 97 LTV conventional loan program: minimum 3% down payment, loan limits within conforming limits, PMI required if down payment is less than 20%, minimum credit score of 620, no income limits, homeownership education course required, eligible property types include 1-unit single-family homes, approved condos, PUDs, and some manufactured homes, and the borrower must make the property their primary residence.
5. How does the Fannie Mae 97 LTV conventional loan program differ from FHA loans? While FHA loans require a minimum down payment of 3.5%, the 97 LTV conventional loan program offers a lower down payment requirement of 3%. Additionally, private mortgage insurance (PMI) on conventional loans can be canceled once the property reaches 80% loan-to-value (LTV). In contrast, FHA loans require mortgage insurance for the loan term.
6. What are the qualification requirements for the 97 LTV conventional loan program? Borrowers must meet the standard Fannie Mae or Freddie Mac lending guidelines, including criteria such as credit score, income, debt-to-income ratios, waiting periods after bankruptcy or foreclosure, and overall credit risk assessment.
