FHA to Conventional Loan Refinancing

Refinance Forms

Frequently Asked Questions

FHA to Conventional Refinancing

Frequently Asked Questions

Can I refinance from an FHA loan to a conventional loan?
Yes. Most of the time you will save more on a conventional loan than refinancing back to an FHA loan.
How do I convert my FHA loan to a conventional loan?
The best way to convert your FHA loan to a conventional loan is to talk give our office a call at 530-221-7700. The first step will be to review your current loan and give you a side-by-side comparison of the new conventional loan and your current loan. This will give you a very detailed look at what your potential savings might be. If you decide to move forward we would then proceed with paying off your existing loan with the new Conventional loan.
How long before you can refinance an FHA loan to conventional?
Most FHA borrowers do NOT realize they can refinance their FHA loan to a Conventional loan within 6 months after closing on their home. They should have a mortgage professional be checking their mortgage every 6 months to ensure they are always in the right loan program. It's always best to get out of the FHA loan as soon as possible because of the monthly mortgage insurance cost on FHA.
Is it better to get a conventional loan or FHA?
This depends on the credit profile of the customer. It's not always best to get a conventional loan. The conventional loan will have a higher payment and more expensive mortgage insurance for credit scores under 660. It's always best though to look at both options and compare the differences side by side.
Does refinancing hurt your credit?
Refinancing does NOT hurt your credit. However, refinancing does require a credit check. Before we pull the credit we will get an estimated credit score and provide a few refinance options (total cost analysis) prior to moving forward with a credit check. This will give you multiple refinance options without having to get a credit inquiry on your credit score. Also, the CFPB does allow a borrower to check credit multiple times within a 45 day period without the credit check affecting their credit score. Click on this link to see CFPB Credit Check Rules. This is a rule set in place so that the customer can make a good decision on their new refinance or purchase a home loan.
What happens to your old loan when you refinance?
After refinancing, your old loan will get paid off by the new mortgage that you take out with your refinance. The old lender normally will send you a check after they are paid off with any remainder escrow account balance you may have in the account.
Can I use my credit cards during a refinance?
Its always best practice to avoid using any credit cards during a refinance or purchase process. The refinance can take anywhere from 30 – 60 days. If you do need to use your credit cards, always ask your current mortgage professional if using the credit card will affect your new loan. A new balance on a credit card will create a higher monthly payment expense. This could disqualify you from getting your new mortgage. Not to worry though as you can always pay off the new debt at close if you have the money to do so.

Self Employed Borrower

Self Employed Borrower

If you have a current FHA loan, the quicker you get out of it, the better and cheaper it's going to be over the long run for your mortgage. So you're probably getting many mailers in the mail to streamline this FHA loan into a new FHA loan. The streamline refinance loan for an FHA loan is refinancing that mortgage into another FHA mortgage. The new FHA mortgage will also have monthly and monthly mortgage insurance required on an FHA loan that you get.

No matter how much equity you have, they still will require you to have monthly mortgage insurance, and so the only thing you'll be able to save is that reduced interest rate. So now, if you were to also look at a conventional loan, which would be my recommendation, I would look at a conventional refinance option. And the reason why is because if you have 5% or more equity in the home, then there are ways on a conventional loan to not have monthly mortgage insurance payment at all. Then, if you have 20% equity in the home, you don't have to pay any mortgage insurance, whereas, on the FHA loan, you still have that monthly mortgage insurance payment. The other thing is, you'll still be able to drop your interest rate, and then there's an excellent chance that you'll be able to get rid of that monthly mortgage insurance payment on your mortgage.

Suppose you were to streamline into another FHA loan. In that case, they do require you to keep that loan balance the same as what you have now, so they don't allow you to finance any closing costs, which any loan that you get, no matter what those mailers say, there are closing costs associated with any loan that you get. So you're still going to have title fees that you can pay, or you can add them to the loan typically well. On a streamline refinance, they do not let you finance closing costs with the loan. You have to keep that loan balance the same because there is no appraisal.

On a conventional loan, they're waving appraisals on many of our mortgages. So you can refinance into a conventional loan, not have to get an appraisal, and get rid of your mortgage insurance.

If you have any questions, reach out to me, give me a call. I'm happy to do a free mortgage review for you any time. Thank you so much.

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