What is the difference between HomeReady, Home Possible, and Conventional 97?

HomeReady (Fannie Mae) and Home Possible (Freddie Mac) both require 3% down with income limits at 80% of area median income — roughly $72,000-$80,000 for Tampa Bay in 2026. They offer reduced PMI rates. Conventional 97 also requires 3% down but has NO income limit — anyone can use it regardless of how much they earn. All three allow PMI to drop off at 20% equity.

When does PMI drop off on a conventional loan?

By law, your servicer must automatically cancel PMI when your loan balance reaches 78% of the original purchase price. You can also request removal at 80% loan-to-value based on the current appraised value. With normal Tampa Bay appreciation of 3-5% annually, many buyers reach 20% equity in 5-8 years — sooner if they make extra payments.

Can I combine conventional 3% down with down payment assistance?

Yes. HFA Preferred and HFA Advantage programs pair specifically with conventional loans, providing up to 5% as a forgivable second mortgage or grant. Bank grants from Chase ($5,000), Bank of America ($7,500), and others also work with conventional financing. Barrett matches you with the right combination for maximum benefit.

What credit score do I need for conventional 3% down?

The minimum is 620, but your interest rate and PMI cost improve significantly at 680, 700, 720, and 740. Borrowers at 740+ get the best possible rates and lowest PMI. If your score is between 620-660, FHA may offer a better deal due to its flat-rate mortgage insurance that does not penalize lower scores as heavily.

Is conventional better than FHA for first-time buyers?

It depends on your credit score and timeline. If your score is 700+ and you plan to stay 7+ years, conventional wins because PMI drops off — saving you tens of thousands over FHA's permanent mortgage insurance. If your score is 580-660, FHA is typically cheaper monthly because conventional PMI is very expensive at lower credit scores.

Conventional 3% Down — HomeReady, Home Possible & Conv 97

Three Conventional 3% Options — Which Fits You?

Not all 3% down conventional loans are identical. There are three distinct products, each with different rules about who qualifies:

Feature	HomeReady (Fannie Mae)	Home Possible (Freddie Mac)	Conventional 97
Down Payment	3%	3%	3%
Income Limit	80% AMI (~$72-80K)	80% AMI (~$72-80K)	None
PMI Rate	Reduced (25% discount)	Reduced (similar)	Standard PMI
First-Time Buyer?	Not required	Required	At least 1 borrower
Min Credit Score	620	620	620
Boarder Income	Allowed (rental income)	Allowed	Not allowed
Homebuyer Education	Required	Required	Required

The bottom line: If your household income is under ~$80,000, HomeReady or Home Possible saves you money through reduced PMI. If you earn more, Conventional 97 is your path to 3% down without income restrictions.

Why PMI Dropping Off Matters More Than You Think

This is the #1 long-term advantage of conventional over FHA. Let us put real numbers on it:

$350,000 Home — PMI vs. FHA MIP Over Time

Conventional PMI (700 credit):~$115/month

FHA Annual MIP:~$155/month

PMI drops off (est. year 7):$0/month

FHA MIP at year 7:Still $155/month

Conventional savings years 7-30:$31,740

Over the life of a 30-year loan, dropping PMI saves you $30,000+ compared to keeping FHA mortgage insurance forever. That is real money — a new car, a kitchen renovation, or years of vacations.

Pairing Conventional 3% with Down Payment Assistance

Just because you use conventional financing does not mean you pay that 3% out of pocket. Here is how to cover it:

HFA Preferred PLUS (Fannie Mae): Up to 5% as a forgivable second mortgage — covers your 3% down payment with surplus for closing costs
HFA Advantage PLUS (Freddie Mac): Same structure, pairs with Home Possible
Chase Homebuyer Grant: $2,500-$5,000 grant (no repayment) in qualifying census tracts
Bank of America America's Home Grant: Up to $7,500 in qualifying areas
Hometown Heroes: Works with conventional loans — up to 5% forgivable

Barrett works with lenders who know exactly which combinations are available for your specific situation. The goal: $0 out of pocket today, PMI gone in 5-7 years, maximum long-term savings.

Credit Score Tiers — How They Affect Your Payment

With conventional loans, your credit score directly impacts both your interest rate AND your PMI cost. Here is what that looks like on a $350,000 home with 3% down:

Credit Score	Estimated Rate	Monthly PMI	Total P&I + PMI
740+	6.25%	~$85	~$2,175
700-739	6.50%	~$115	~$2,260
660-699	6.875%	~$165	~$2,395
620-659	7.25%	~$225	~$2,540

See the pattern? At 740+, conventional is cheaper than FHA from month one AND drops off later. Below 660, FHA's flat-rate insurance often wins on monthly payment. Barrett's lender runs both scenarios side-by-side for you.

The HomeReady / Home Possible Income Limit Workaround

The 80% area median income cap trips up some buyers. In Tampa Bay for 2026, that means approximately $72,000-$80,000 household income depending on county. If you earn more:

Conventional 97 has NO income limit — same 3% down, just slightly higher PMI
Properties in low-income census tracts have no income restriction even for HomeReady/Home Possible
Barrett checks census tract eligibility for every listing before showing — some Tampa neighborhoods qualify regardless of your income

When Conventional 3% Is NOT the Best Choice

Be honest about your situation. Conventional 3% is not always the winner:

Credit below 660? → FHA likely offers better terms
Veteran or active military? → VA beats everything (no down, no PMI, no income cap)
Buying rural/suburban? → USDA offers 100% financing with lower fees
Found a 2020-2021 listing with existing mortgage? → Assume their rate at 2.75-3.5%

Barrett's Strategy: Maximize Day-One Savings AND Long-Term Wealth

Most agents just want to close the deal. Barrett Henry, REALTOR® looks at your 5-10 year picture. With conventional 3%, the playbook is:

Get in for $0 out of pocket using DPA + seller concessions
Build equity through payments + appreciation (Tampa Bay averaging 3-5% annually)
Request PMI removal at 80% LTV (often achievable in 5-7 years)
Save $100-200/month permanently once PMI drops — redirect to principal or investments

That is the wealth-building strategy that nobody using "only program money" ever hears about. Barrett builds this plan for you from day one.

Conventional 3% Down: PMI Drops Off, Pairs with Forgivable Grants

Why choose conventional 3% down over FHA?