Can I refinance from FHA to conventional?
Yes. You can refinance an FHA loan into a conventional loan if you qualify under conventional rules. A common reason is to end FHA's annual mortgage insurance premium (MIP), since a conventional loan needs no mortgage insurance at 80% loan-to-value (LTV) or less. Above 80%, you would trade MIP for private mortgage insurance (PMI), which can be removed later.
Educational answer from Mortgage Expert. Mortgage Expert's licensed loan originator is Shahram Sondi, Florida mortgage broker, Certified Mortgage Advisor™, NMLS 186790. Sources checked .
How it works
How long FHA mortgage insurance lasts
For FHA case numbers assigned on or after June 3, 2013, HUD sets how long the annual MIP lasts. If your original LTV was 90% or less, MIP lasts 11 years. If it was above 90%, it lasts for the full term of the loan. With 3.5% down, your original LTV was above 90%, so your MIP does not end on its own.
Leaving FHA ends that MIP. HUD says the upfront MIP is not refundable, except as a credit when you refinance into another FHA loan within three years. A move to conventional gets no upfront MIP refund.
What the conventional side requires
The new loan follows Fannie Mae or Freddie Mac rules, not FHA rules. You need to qualify on credit, income and debts, and the home's value is checked by appraisal or an automated value.
For a rate-and-term (limited cash-out) refinance, Fannie Mae sets no waiting period on your current loan. For a cash-out refinance, you need six months on title, and the loan being paid off must be at least 12 months old.
PMI vs MIP
Fannie Mae requires mortgage insurance only when the loan is above 80% of the value. If you still need PMI, federal law lets you ask to cancel it when your balance reaches 80% of the original value, and it generally ends on its own at the scheduled 78% point if you are current.
Whether the switch makes sense depends on the full picture: the new rate, closing costs, any PMI, and how long you plan to stay. Compare total monthly cost and total closing cost, not just one number.
Hitting 80% LTV to skip PMI
Illustrative example. This is not a real borrower, offer or quote. Values and dates are assumptions unless a program rule is identified.
A homeowner requests a total conventional refinance loan of $280,000 to replace an FHA loan. The lender must confirm the payoff and all costs included in that amount. Compare an appraised value of $350,000 with a value of $340,000.
The math, step by step
- LTV at a $350,000 value: $280,000 ÷ $350,000 = 80%. That is not above 80%, so no PMI is required.
- Largest loan with no PMI at a $340,000 value: $340,000 × 80% = $272,000.
- Cash needed at closing to avoid PMI at that value: $280,000 − $272,000 = $8,000.
Takeaway: A small change in the appraisal can decide whether PMI applies. The homeowner could bring $8,000, accept PMI and remove it later, or wait for more equity.
Easy things to get wrong
- Check your FHA case date and original LTV first. If you put 10% or more down after June 2013, your MIP may end after 11 years anyway.
- Rolling closing costs into the new loan raises your LTV and can push you just over 80%.
- There is no upfront MIP refund when you leave FHA for conventional.
- Conventional pricing and PMI both depend on your credit score and LTV. Get a full quote before you assume the switch saves money.
What to do next
Add up the closing costs and the monthly change, then see how many months it takes to break even.
Wondering if it is time to leave FHA? Shahram Sondi can check your MIP end date, your equity and whether a conventional refinance adds up.
Check the sources
- HUD Mortgagee Letter 2013-04: annual MIP duration
- HUD Handbook 4000.1: refinances and UFMIP refunds
- Fannie Mae Selling Guide B7-1-01: mortgage insurance above 80% LTV
- Fannie Mae Selling Guide B2-1.3-03: cash-out refinance transactions
- CFPB: when can I remove PMI?
Sources checked . Program guidance and lender requirements can change.
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Educational only. Conventional loan guidelines, lender overlays, rates, fees, PMI, LLPAs, and underwriting requirements can change. Final eligibility depends on full underwriting review. Mortgage Expert, Inc. is not affiliated with Fannie Mae, Freddie Mac, FHFA, or any government agency.
