If you’re a first-time home buyer (or haven’t owned real estate in the last three years), ask your loan 
officer about “The 97 Loan.” The down payment required is only 3%, and it’s a cheaper loan than FHA’s first-time home buyer loan.
Too often, banks and other lenders push the FHA loan, and here are two reasons why:
- The FHA loan is a big profit-maker for lenders.
- Loan officers think about the 5 percent down conventional loan and forget about The 97 for first-time buyers.
Compare FHA to “The 97”
FHA has an upfront mortgage insurance fee of 1.75 percent. The 97 has no upfront fee.
FHA’s monthly mortgage insurance fee lasts forever. The 97 Loan’s MI fee can get dropped when you have 20-22 percent equity.
FHA down payment is 3.5%. The 97 Loan is 3%.
How to Qualify for The 97 Conventional Loan
- Credit score must be at least 620. (Some lenders want 640.)
- Bankruptcy must be discharged for 24 months.
- Debt-to-income ratio should be 43% max, based on gross income (before deductions).
- Maximum loan amount is $424,100. Maximum price is $436,216.
Getting Together the Down Payment Money
The down payment money may be from your own verified funds or from family. Unverified cash is not allowed, meaning get that dough out of your safe into a bank account now.
You can also get creative and borrow money from your retirement account. Or, you can sell something like a car or motorbike, as long as you show the bill of sale and matching deposit receipt into your bank account.
Enough already! Pick up your phone. Tell your loan officer you want to get pre-approved, then call your real estate agent and go find a home to call your own!
If you’re in California or Washington, click here to reach me.
Please share this with others who want to become a home owner.
Hi, Carolyn. I bought your book and have been following it to the letter. Have hit a little snag with a hospital ER that is dragging its feet about re-filing a claim for services that was originally denied by Medicare (my primary carrier) because my chiropractor’s billing office had erroneously filed with another primary carrier when I was involved in an automobile accident 3 years previously. I know it will eventually get straightened out, just frustrating that it is taking them so long. They have reported my bill with the hospital to the credit bureau. Should I correspond directly with the current collection agent or just keep working with the hospital only? Also, really excited about your post about The 97 loan! I have lived in the townhouse I am renting for 15 years and my landlord has agreed to credit up to 20% of my rent towards purchase. I don’t think I can get my credit score up past 604; at least that is the way it looks right now. If I can pay more down than the 3% would it excuse my not meeting the credit score required of 620 or higher. I have a Masters in social work and I am divorced for almost 20 years.
Would really appreciate your advice on how to counter the credit score.
Thanks,
Janie Lyle
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Janie, thank you for reading my post today. The good news is that mortgage companies do not require you to pay off medical collections to buy a home. Why? Because so many good people are victims of errors and ineptitude of medical billing offices, just as happened to you. It’s a good idea to communicate with both the collection agency and the hospital. It is illegal for them to post false negative information about you to the credit bureaus, so don’t hesitate to remind them of that!
If you are in CA or WA, I will be happy to help you get pre-approved for a home. If you are in another state, then contact a full service mortgage lender (not a big bank), and ask for a FHA loan.
Best wishes to you!
Hi Caroline. My name is Jorge and I bought your book on credit repair. Im also a Realtor here in Providence RI. I just want to take this opportunity to tell you how awesome you are. too bad I dont operate in California or nearby areas. I love your email posting and also your book. Thanks for all your work and vibrance you bring to the industry. Jorge
Jorge, thank you for taking the time to reply to my post today. And thank you for your kind compliment. I wish you all the best with your real estate business in Providence, RI.
Thank you!! This is very helpful information that I needed!!!