Homebuying with 3% Down

Saving up for a down payment is one of the biggest challenges people face during the homebuying process. In 2025, a 97% loan-to-value option at Alaska Housing Finance Corporation was created to make this obstacle easier to hurdle.

What does 97% Loan-to-Value mean?

In the mortgage lending world, 'Loan-to-Value' (LTV) describes the ratio between the home's loan amount (mortgage) and the value of the home. 

With a 97% LTV ratio, a homebuyer can make a down payment of 3% of the home sale price while obtaining a loan for the balance. 

Example

With a 95% LTV, a $400,000 home sales price would require a down payment of $20,000. With a 97% LTV, the down payment drops to $12,000. In this example the buyer defers $8,000 upfront, with the deferred cost rolled into their loan. Depending on the interest rate, this could result in an increase to their monthly mortgage payment of about $100.

Check out this blog post for a more detailed comparison between a 5% down payment and a 3% down payment. 

Who qualifies?

When obtaining a home loan, buyers will need to qualify with a lender. If you're interested in an AHFC loan you can see an overview of AHFC loan products and talk to your lender to find out which ones you qualify for. The 97% LTV option can be layered with most single-family mortgage programs offered by AHFC and homebuyers selecting AHFC for their mortgage can choose between the 97% and 95% LTV options.

An important tradeoff for a buyer to consider is how a smaller down payment will increase their monthly mortgage payments. Buyers will need to work with their lender to determine which option is the best choice for their unique financial situation. 

How do I get started?

Sign up for a free homebuyer education class to learn about the steps to homeownership, including how to determine which loan is best for you.

When you’re ready to move forward and evaluate your loan options, contact an approved AHFC lender.