When our realtors are asked the question, “Have you ever had an offer rejected because it was FHA and they accept conventional offers only,” a whooping 80% said yes. Because of this response, we are excited to announce the new 97% Conventional Financing. This allows your new homebuyers, millennial’s, or any potential buyers the ability to purchase a home with a conventional loan.

The following includes the guidelines for the new 97% conventional finance.

  • 3% (use to be 5%) down is back and it can come from a gift from a relative. This is similar to an FHA.
  • A huge obstacle to overcome is for buyers to have the ability to have enough cash so they can close. In addition to the 3%, the buyer is also responsible for closing costs, prepaids, and reserves. With the 97% Conventional Loan, buyers have the ability to increase their interest rate slightly to cover a portion of those additional costs.
  • This additional credit cannot be used towards the down payment.
  • The lender credit will be based on the loan amount not the purchase price.
  • A lot of listings say “conventional or cash only.” This is going to give a viable option for your buyers to be able to get conventional financing and put in a conventional offer on the contract and not have to present the offer as FHA.
  • The minimum credit score is only 620.
  • This applies to Fixed Rate Mortgages only – adjustable rate mortgages are not eligible for 3% down at this time.
  • This financing is only allowed for 1 unit primary residences. For example: single family homes, condos, townhomes, and attached or detached properties. This is not eligible for 2-4 unit properties or manufactured housing.
  • At least one of the buyers must be considered a “first time homebuyer.” A first time homebuyer is defined by Fannie Mae as any one who has not owned a property in the past three years.

Freddie Mac will also be providing a 3% options in March. Stay tuned as we will be providing further information once it is available.