If you are like most first-time homeowners, your first mortgage was an FHA loan. Your FHA loan gave you the ability obtain financing, requiring only minimal down payments and fair-to-good credit scores. While this was a perfect fit for you at the time, you now may be looking to save some money. One way to do this is to refinance into a conventional loan.
One significant advantage of switching to a conventional loan is that, with the right loan-to-value ratio, it can eliminate mortgage insurance. While conventional loans have stricter credit requirements, and typically require borrowers to have at least 20% equity in their homes, any mortgage insurance provision cancels once your house reaches a 78% loan-to-value ratio.
Additionally, refinancing to a conventional mortgage may allow you to take out a larger home loan.
Refinancing does come with costs, such as closing fees, and may require you to present many of the same documents during the application process as you did with your original home purchase. Plus, you may also need to pay for an appraisal of your home.
Checklist: When Is a Good time to Refinance from an FHA to a Conventional Mortgage?
If you’re still not sure whether you should refinance from an FHA loan into a conventional mortgage? Take a couple of minutes to answer the following questions. They can help you decide if a refinance is right for you.
What are my goals?
Does refinancing make financial sense?
What is the current value of my home?
What is my existing home equity?
Can I afford the refinancing closing costs and fees?
Can I provide all of the necessary documentation?
Considering a Refi? Let us help! Our expert mortgage consultants can help you evaluate your current loan situation and help you identify if a refinance is right for you. Give us a call today!