FHA loan refinance to conventional

Asked by Dave, Folsom, CA Thu Apr 29, 2010

To avoid paying mandatory PMI for 5 years, how hard is to refinance the FHA loan into a conventional loan, if the clients come with the 20% down-payment to qualify for the conventional loan??
Any restriction on FHA to conventional???

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Steven Ornellas’ answer
Steven Ornel…, Agent, Fremont, CA
Fri Apr 30, 2010
Hi Dave,

You correctly state that FHA loans carry a mandatory 5-year MI period regardless of LTV percentage, and after this 5-year period the your original LOAN AMOUNT must be paid down to 78% (not that the loan amount is 80% of current market value, which is typical for non-FHA MI removal). Hence, refinancing is the only way I am aware of to remove MI in your case. I am not aware of any FHA-to-conventional restriction.

This "78% or 5-year Rule" before Mortgage insurance can be terminated is covered here:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi…

Also, any MI refund is based on a few things, and can be reviewed here:
http://www.hud.gov/offices/hsg/comp/refunds/fhafact.cfm

Best, Steve
1 vote
Sue Archer R…, Agent, Palm Harbor, FL
Fri Apr 30, 2010
There are more questions here. How long ago did they establish this loan? Why wouldn't they just want to pay the principal down to where the PMI is no longer required? I'd talk to the original lender first.

Everytime you refinance, or establish a new loan, you are hit with all the closing costs. and the amortization table starts over again....I personally resist that option if the total objective is to remove the PMI. There might be another way besides refinancing...if they bring in 20% and get their LTV (loan to value) down under 80%.
Web Reference:  http://www.suearcher.com
0 votes
Roswell Moore…, Mortgage Broker Or Lender, Scottsdale, AZ
Fri Apr 30, 2010
Hi Dave,

As long as the borrower qualifies for a conventional loan and the property appraises, there shouldn't be any problems refinancing from an FHA to Conventional loan.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct
Web Reference:  http://www.ezAZloan.com
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