Refi out of FHA loan. How long do I need to wait?

Asked by Spmoore39, Palatine, IL Tue Aug 21, 2012

My wife and I bought (..ok, stole) a home about 6 months ago with an FHA loan with a large monthly PMI. Comparing the low price we paid and two recent sales in the neighborhood we are well under the 80% loan-to-value raito requiring PMI payments.

I spoke with our current lender about our options to get rid of PMI payments and was told we have to wait one year from the closing date before we can refi (through a non FHA program). Other sources say six months is the minimum wait. What's the truth?

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Bart Sitzber…, Agent, Kapolei, HI
Sun Sep 9, 2012
1 year sounds about right to be able to refi under a different loan product other than FHA in order to drop the PMI. It will depend on how the loan was set up originally when you closed on the home with the current Lender. They typically want the loan to season at least 1 year before change. Talk to a few other Mortgage Brokers or Bank Loan Officers to get their take on it. You will definitly need 80% or more equity in the property.
1 vote
In order to drop PMI you must have at least 20% equity in the property and refinance into a conventional mtg. The reasons a person goes with an FHA loan in the first place are usually credit score below 640, DTI above 43 or only able to put 3.5% down. With an FHA loan you can have a credit score as low as 580, and a DTI as high as 55%.

It is always advisable to get into a conventional product as soon as you are in a position to because PMI is lower and it drops off the loan once you get your equity up to 20% of the value of the home. With an FHA loan PMI stays with the loan until it is paid off.

Technically you can refinance after making 6 pymts but in order to either drop or reduce PMI you would need to have the loan paid down to at least 5% so that your loan amt is not more than 95% of purchase price. After a yr you can go off of appraised value so if values go up enough, you can either drop or reduce your PMI by going conventional.
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