How to Get Conventional Loan With 3% Down


In 2014, Fannie Mae and Freddie Mac (federally-sponsored home mortgage enterprises formed by the U.S. Congress) announced a 3 percent down conventional mortgage loan product that was created to make it easy for more people to become homeowners.

Those who previously wouldn’t qualify or those who don’t have the necessary amount of cash for a huge down payment can now own a home.

Unfortunately, many home buyers still don’t understand such loan products very well — especially the first time owners that they were intended for.

Here, we’ll discuss everything you need to know about the 3 percent down conventional loan, and how it can help you get your own home.

How to get a 3% down conventional loan?

conventional mortgage loan - Sprint Funding

The minimal qualifications set forth by Fannie Mae is a credit score with FICO of 620 to be approved for a 3 percent down mortgage.

Be aware, however, that most candidates that get approved for a conventional mortgage have a credit score of 700 or higher, and that those who are in the lower end may find it harder to get approved.

During a 2016 interview, Fannie Mae’s product development vice president, Jonathan Lawless stated that anyone with a score of 620 is unlikely to pass their lending standards.

Additionally, banks that provided the 3 percent down option can have their own set of requirements, given that they meet the minimums provided by Fannie Mae.

An example of this can be found from JPMorgan Chase when they rolled out their 3 percent down mortgage option with Fannie Mae as their partner, where they required 680 as the minimum score.

Furthermore, the Home Possible Advantage option from Freddie Mac requires a minimum score of 660 with purchase transactions.

Our main takeaway is that even if you can technically apply for a 3 percent down conventional mortgage using a low credit score such as 620, this probably won’t pass the standards unless you can offset the score to the underwriter’s eyes with an incredibly high income.

An ideal borrower will have income that answers for the loan, a high credit score, enough savings to cover for your first few mortgage payments, and a stable, long employment history.

Other requirements

Apart from the income and credit qualifications, 3 percent down conventional mortgages also have other requirements such as:

  • The loan needs to be a mortgage with a fixed-rate
  • The property you are looking for is a single-unit residence. Co-ops and condos are allowed, however, you can’t purchase more than one home unit such as a whole duplex.
  • You need to live and stay in the home that you’re planning to buy.
  • The loan has a maximum term of 30 years.
  • Your loan’s amount must meet the Fannie Mae and Freddie Mac loan limit, which is currently $424,100 in single-unit homes and available for most areas.
  • Those wishing to participate in the HomeReady 3 percent down program need to complete an education course for homebuyers.

What is a 3 down conventional loan?

Some years ago, the housing market made a slow but steady recovery, so Fannie Mae and Freddie Mac both offered a way to purchase mortgages with only 3% down. Fannie Mae is known to offer two versions of 3 percent down loan, so here’s the difference between the two:

  • The standard 3%-down loan is called the “Conventional 97,” which was made for first-time homeowners. This is defined as “at least one borrower that hasn’t owned a home in the last three years.” This loan has no income restrictions and the homebuyer education course isn’t a requirement.
  • On the other hand, the HomeReady 3 percent down loan is available for particular low-income areas and doesn’t have a first-time buyer restriction. However, the process of getting a HomeReady loan requires a bit more work, since the homeownership course is required before you can qualify.
    In exchange, this option offers many features that have been designed to allow low-income buyers access to homeownership such as being able to use a co-borrower’s income to qualify, even if they aren’t an occupant.

The Freddie Mac option of the 3 percent down mortgage is known as the Home Possible Advantage and has similarities to its counterpart from Fannie Mae.

Furthermore, such loan programs are also offered by a selection of banks, some of which are partners with Fannie Mae and others with Freddie Mac. Banks will also give their names for the 3 percent down loan, such as “YourFirstMortgage” by Wells Fargo.

Even with all the loan programs, however, it’s still important to know that borrowed will need to pay for PMI (private mortgage insurance) until the loan-to-value ratio is paid up to 80%.

Are there 3 down conventional loan income limits?

Fortunately, the standard 3 percent down program doesn’t have a set limit on your income. The HomeReady 97% loan, however, requires the borrower to be below or at 80% of the area’s average income.

Can I buy a home with 3 percent down?

house and piggy bank balance

Yes. The Conventional 97 program is a 3% down payment program and is available from Freddie Mac and Fannie Mae. For many homeowners, this is a less-expensive option compared to an FHA loan, making it the smarter choice.

Also, the Conventional 97 mortgage lets borrowers take the entire 3% down payment to come in the form of gifted funds, so you can get it from anyone related by marriage or blood, or through a domestic partnership, a legal guardianship, or from a fiancée/fiancé.

How much do you need down on a conventional loan?

Because of the achievable requirements and very low down payments, conventional loans have become very popular.

However, there is a big difference in how many borrowers put as their initial down payment.

  • Older people will usually put down 20% because they are upsizing or downsizing and are planning to sell an old house. They then use this money to put towards their new home.
  • A majority of people will put down somewhere around 5% to 10%. By putting down at least 5%, the conventional loan rates will drop compared to choosing the 3% down option.
  • For those who don’t have 5% for a down payment, they need to decide whether they want an FHA loan or a conventional loan.


Thanks to their low rates and wide availability, taking out a conventional loan is the most popular mortgage option in the country. Nearly 3 in 5 buyers will opt for a conventional loan whenever they want to refinance or buy a house.

In the end, homebuyers need to check their options for a conventional mortgage with at least three different lenders.

The rates today are pretty low, and may even get lower using the right shopping practices.

So what are you waiting for? Check your conventional loan rates and eligibility today. Let Sprint Funding assist you with anything you need to know about conventional loans.