Who qualifies as a first-time homebuyer for the Conventional 97 program?

A first-time homebuyer is defined as someone who has not had an ownership interest in a residential property within the last three years. At least one borrower on the application must meet this criteria.

Can I use gift funds for the 3% down payment?

Yes. The entire 3% down payment can come from a documented financial gift provided by a family member, non-profit organization, or approved government assistance program.

Is PMI permanent on a Conventional 97 loan?

No. Unlike FHA loans, PMI on a Conventional 97 loan is cancellable. It can be automatically terminated when your Loan-to-Value (LTV) ratio reaches 78% or manually requested at 80%.

Conventional 97 Loan: 3% Down Payment Guide & Requirements for 2026

The dream of homeownership often hinges on one major obstacle: the down payment. While many conventional loan programs require 5% or more down, the Conventional 97 Loan Program offers a powerful solution, allowing borrowers to secure financing with just 3% down.

This program is a standard conventional mortgage backed by Fannie Mae, designed to increase accessibility for first-time homebuyers and those looking for a low-down-payment option that still avoids the permanent mortgage insurance associated with FHA loans.

The Conventional 97 program follows all of the standard rules and guidelines of a traditional conventional loan. Review all Conventional Loan requirements in our main guide.

I. Core Eligibility Requirements

The Conventional 97 program is specifically designed to help borrowers with limited savings enter the housing market. However, it maintains strict requirements to mitigate the risk associated with low equity.

Borrower Eligibility Requirements

To qualify for the 97% Loan-to-Value (LTV) option, you must meet the following criteria:

First-Time Homebuyer Status: At least one borrower on the mortgage application must be a first-time homebuyer. This is defined as someone who has not had an ownership interest in a residential property within the last three years.
Credit Score: While the minimum FICO score for a Conventional Loan is 620, the Conventional 97 program often requires a slightly higher score—typically 640 or 660 and above—to compensate for the low down payment. Review our guide on Conventional Loan Credit Score Tiers to see how your score impacts your rate.
DTI Ratio (Debt-to-Income): You must meet the standard Conventional Loan DTI ratios, which generally cap total monthly obligations at 45% to 50% of your gross monthly income. For a detailed look at how DTI is calculated, read our Conventional DTI Ratio Guidelines.

Property Eligibility Requirements

The Conventional 97 program is strictly limited in terms of the properties it can be used to finance:

Primary Residence Only: The property must be a single-family home (1-unit) that will be the borrower’s primary residence.
Exclusions: It cannot be used for investment properties, second homes, or multi-unit properties (duplexes, triplexes, etc.).
Loan Limits: For 2026, the loan amount must adhere to the $832,750 baseline set by the FHFA. Verify your loan amount against the current Kansas and Missouri Conforming Loan Limits.

II. Financial Details and PMI (The Fine Print)

Down Payment Source and Gift Funds

One of the greatest benefits of the Conventional 97 program is its flexibility regarding the source of the 3% down payment.

Gift Funds Allowed: The entire 3% down payment can come from a financial gift provided by a family member, a non-profit organization, or an approved government assistance program.
Documentation: To ensure you have everything needed for approval, see our Conventional Loan Documentation Checklist.

Private Mortgage Insurance (PMI)

Since the Conventional 97 is a low-down-payment loan, Private Mortgage Insurance (PMI) is mandatory. Unlike FHA loans, however, this insurance is not permanent.

The Cost: The cost of PMI is generally factored into your monthly mortgage payment.
The Benefit: PMI can be automatically terminated when your LTV reaches 78% or manually requested at 80%. Learn exactly how to remove the monthly insurance fee in our guide on How to Cancel PMI.

III. Key Advantages and Alternatives

Advantages Over Other Low-Down-Payment Options

Feature	Conventional 97	FHA Loan
Minimum Down Payment	3%	3.5%
Mortgage Insurance (MI)	Cancellable PMI (Removed at 78%-80% LTV).	Permanent MIP (Requires refinancing to cancel).
Credit Flexibility	Higher credit score expectations for best rates.	More lenient on lower credit scores (down to 580).

The ability to cancel PMI is the single greatest financial advantage over an FHA loan. For a side-by-side breakdown, view our FHA vs. Conventional Loan Comparison.

Conventional 97 Alternatives

HomeReady: A Fannie Mae program with reduced PMI rates but specific income limits. Learn more about Fannie Mae HomeReady.
High Balance Loans: For 2026, purchases over $832,750 require specialized Jumbo vs. Conventional Loans.

IV. Is the Conventional 97 Program Right for You?

The Conventional 97 program is ideal if you:

Have solid or good credit (640+ FICO).
Are buying a primary residence in Kansas City or Overland Park.
Want to avoid the permanent costs of FHA mortgage insurance.

START YOUR CONVENTIONAL 97 PRE-APPROVAL

Return to our main Conventional Loans Guide for Kansas and Missouri borrowers.

Expertise & Compliance Statement: This guide was reviewed and approved by Rick Woodruff, a Licensed Mortgage Loan Originator (NMLS #248984). Metropolitan Mortgage is a Licensed Mortgage Lender in Kansas and Missouri and an Equal Housing Opportunity Lender.