The Conventional 97 Mortgage Option: The Three Percent Solution?

Buying a home in 2016 (or any year for that matter) can be a financial struggle. Any obligation that lasts for thirty years should be entered into with a very good assessment of how you intend on returning the money.

The traditional twenty percent down payment type of mortgage is still the best way to secure the best mortgage rate and the most favorable terms has become harder to obtain. Enter the Conventional 97 Mortgage Option, a three percent down solution that may allow you to surmount that final hurdle. The Conventional 97 allows the buyer to secure a mortgage with only a three percent down payment. But is it the right mortgage for you?

The Affordability Factor

While you might be a good steward of your credit and hold down a good job, the ability to put those two fine characteristics to work for you and obtain the home of your dreams is not as easy. There are programs available from the VA and even the USDA that come with no down payment options. The FHA has a program that allows for 3.5% down but charges hefty fees to insure that agreement. Fannie Mae and Freddie Mac also have programs that allow for a low, 5% down payment. There are fees, sometimes adding quite a lot to the mortgage payment (the new home buyer will pay PMI – Private Mortgage Insurance – and often a basket of additional fees based on the amount borrowed). What might be “cheap” to get into may end up putting a significant monthly burden on the home owner as a result.

The Conventional 97

What is it?

This option is the result of this down payment dilemma faced by many young first-time home buyers. Even with good credit scores and established earnings, accumulating a sizable down payment can put home ownership into the distant future. The Fannie Mae’s Conventional 97 hopes to fix that issue with a 3% down payment, which may come in the form of a gift from a blood or marriage relative and an unusually low mortgage insurance premiums.

Is it Government Sponsored?

Yes and no. It is available only through Fannie Mae.

How is the down payment calculated?

This is one of the unique features of this program. It uses the lower of two pieces of information about the home. It looks at both the appraisal and the purchase price, which are often slightly out-of- sync. While the actual mortgage rates are comparable, the cost of the mortgage insurance is not paid upfront and that insurance is often less expensive that the same type of insurance offered privately or through the FHA.

Are there any restrictions?

While you can use the Conventional 97 to refinance your house, you cannot use it for a jumbo mortgage in any state. A 3% down allows you to purchase a home with a price tag up to $430,000, which, when the down payment is calculated brings the home’s financed amount to $417,000, the maximum amount you are permitted to finance. It can only be used on single family dwellings; the home must be owner occupied. Adjustable Rate Mortgages (ARMs) are not available. And lastly, no counseling is required (FHA loans require the completion of a program).

One last thing…

A credit score of 680 is required for this loan arrangements. But if you are using a gift to help with any part of the down payment, the credit score requirement rises to 740.

How can we assist you today?


On behalf of The Jones Group @ Sunriver Realty

Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate

Bryce Jones, Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR

Karen Marcy, Broker/Realtor

The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707

Mobile: 541-420- 3725 | Mobile: 541-420- 4018 | Mobile: 503-327- 9611 | Fax: 541-593- 5123



Licensed in Oregon