FHA Loan to Conventional Loan – Refinance and Drop Mortgage Insurance

If you have an FHA loan, you’ll want to read this.

Look, we’ve all been there, you’re a first-time homebuyer, you’re worried about having enough for a downpayment, and an FHA loan makes sense for you because of its more flexible underwriting standards.  You can qualify with a credit score of 580 and put down as little as 3.5%. That’s pretty great!

If you have an FHA loan, you probably already know that:

  • The home you purchase must be your primary residence.
  • FHA loans require that the buyer pay Mortgage Insurance Premium over the life of the loan. 
  • There’s also an additional upfront MIP charge of 1.75% of the loan amount that is traditionally financed into the total loan.  

Currently, rates are historically low, so it’s a great time to consider graduating from your FHA to a Conventional mortgage if you plan to stay in your home long term.

Now, let’s talk about conventional loans, shall we?

Conventional loans are a bit different. In general, if you put down less than 20% you may have to pay mortgage insurance, either monthly or upfront. But if you work with a Homespire Loan Officer, they may be able to work their magic and help you eliminate MI altogether, whether or not you make that 20% down payment.

If you do have to pay MI on your Conventional loan, once you hit 22% equity, it drops off… forever.  With an FHA loan, you pay that mortgage insurance for the life of the loan, no matter how much equity you’ve earned.

FHA loans are great and really open doors for so many people who might not have otherwise been able to become homeowners. But if you currently have an FHA loan, now is the time to consider refinancing to a Conventional loan and dropping that mortgage insurance. 

If you have any questions, please give us a call.  A Homespire Loan Officer is always available to crunch the numbers to see if a refinance makes sense for your situation. It doesn’t cost anything to simply go over your options.

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