Refinancing An FHA Loan To A Conventional Loan

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With its lenient down payment and credit score requirements, an FHA loan can be an ideal starter mortgage. But if you’ve improved your credit and built up some equity in your home, you may be able to avoid some FHA loan fees and get a better refinance rate by refinancing to a conventional loan — one that’s not backed by the government.

Here’s what you need to know about refinancing an FHA loan to a conventional loan.

Can you refinance an FHA loan into a conventional loan?

Yes, you can refinance from an FHA loan to a conventional loan as long as you meet the standards for a conventional loan.

Requirements to refinance an FHA loan to a conventional loan

These are some of the most common financial requirements for a conventional loan refinance:

• A minimum credit score of 620
• At least 20 percent equity in your property
• A maximum debt-to-income (DTI) ratio of 45 percent
• Proof of income and homeowners insurance

When can you refinance an FHA loan to a conventional loan?

As long as you meet the lender’s requirements, you can refinance an FHA loan into a conventional loan at any time. However, your state or lender may require the refinance to result in a “net tangible benefit,” like reducing your mortgage payment or shortening your loan term. And there are slightly different requirements if you’re looking for a cash-out refinance.

In contrast, you’d have to wait the better part of a year — 210 days after closing — to refinance to another FHA loan.

Why refinance your FHA loan to a conventional loan?

There are several reasons you may want to refinance your FHA loan:

• Get rid of mortgage insurance. Unlike conventional loans, many FHA loans require borrowers to pay mortgage insurance premiums (MIP) for the entire loan term. However, if you have at least 20 percent equity in your home, you won’t need to pay for private mortgage insurance (PMI) — the conventional loan equivalent — if you refinance to a conventional loan. Even if you still have to pay PMI, you can cancel private mortgage insurance once you reach a certain level of equity, unlike MIP.
• Interest rates have dropped. Although rates remain much higher than they were in 2021 and 2022, if you took out your loan more recently, today’s rates may be lower than what you’re paying now. That, and conventional refinance rates tend to be lower than FHA refinance rates.
• Your credit score has improved. Let’s say your credit score was 600 when you took out the FHA loan. Four years later, it’s now 670 — or, even better, 700. That’s a huge difference that can help you qualify for a more affordable loan.
• You can convert your home equity into cash. Conventional mortgages allow you to tap up to 80 percent of your home’s equity through a cash-out refinance without paying mortgage insurance.

Drawbacks of refinancing from an FHA to a conventional loan

While there are good reasons to refinance from an FHA to a conventional loan, there are also drawbacks to this and any refinance.

• You might still pay mortgage insurance for a while. Although refinancing is the only way to remove MIP in most cases, you may still have to pay PMI for awhile after you refinance to a conventional — and it’s likely to be more expensive than MIP.
• Refinancing isn’t free. Since refinancing is essentially getting a new mortgage, you’ll once again incur closing costs, which — though cheaper than for purchase loans — are still substantial on large mortgages. Depending on your lender, you might be able to roll these costs into your loan, but that will ultimately increase your new monthly payment.
• You’ll have to go through the entire loan process again. Remember all the work you had to do to get approved for your first loan? Get ready to do it again. Conventional refinancing involves a lot of paperwork and back-and-forth exchanges with your lender. The average time to close a conventional refinance loan was 41 days as of May 2025, according to ICE Mortgage Technology.

Because of the time and costs involved in refinancing, you’ll ideally keep your refinanced mortgage until you reach the break-even point, when your savings outweigh your closing costs. If you plan to move in the near future or don’t have long left in your loan term, refinancing might not be wise.

How to refinance from an FHA loan to a conventional loan

Step 1: Determine why you want to refinance

Your reasons for refinancing will determine the type of refinance you want. For example, if you’re hoping to lock in a lower rate or shorten your loan term, then a rate-and-term refinance might be the best option. On the other hand, if you want to borrow against your equity — perhaps for a home improvement project or debt consolidation — then a cash-out refi might be a better fit.

Step 2: Research the same loan type

Once you’ve chosen the type of refinance you’d like, start looking for lenders. If you’re happy with your current lender, contact them and see if they have any refinancing options that suit you. But request quotes from a few other lenders as well to ensure you’re finding the best rates and terms possible.

Step 3: Evaluate loan offers

After submitting a loan application, you’ll receive a mortgage loan estimate within three business days. Compare your offers, making sure to review each loan’s interest rate and annual percentage rate (APR), as well as its closing costs.

Step 4: Fill out application

Once you’ve chosen a lender, you’ll need to submit your loan paperwork and financial documentation, such as pay stubs and tax returns. You should also prepare for a home appraisal, which many lenders require before closing on a refinance.

Alternatives to refinancing your FHA loan to a conventional loan

If refinancing your FHA loan to a conventional loan isn’t right for you, you can still take advantage of lower interest rates with an FHA streamline refinance. This program offers a refinance without some of the more stringent underwriting tools, such as the need to verify your credit or do an appraisal.

To qualify for an FHA streamline refinance, you’ll need to:

• Have had your current FHA loan for at least 210 days from closing and at least six months since your first mortgage payment
• Have a record of on-time payments on your loan and no current delinquency
• Receive a “net tangible benefit” from refinancing, such as lowering your monthly payment or changing from an adjustable-rate loan to one with a fixed rate
• Not take out more than $500 worth of equity

If you or a co-borrower have served in the armed forces, you might also qualify for a VA refinance, although if you’re refinancing into a VA loan from a non-VA loan, you’ll need to choose the cash-out refinance option.

FAQ

• How long does it take to switch from FHA to conventional?
  

  According to ICE Mortgage Technology, it takes an average of 41 days to close on a conventional refinance loan as of May 2025. By contrast, it takes an average of 44 days to close on an FHA refinance.

• What is the 90-day rule for FHA loans?
  

  The 90-day rule prohibits the use of an FHA loan to finance a property if the previous owner lived in it for less than 90 days before selling it. This is designed to discourage property flipping.

• Can you refinance an FHA loan to a VA loan?
  

  Yes, but you’ll need to choose the VA cash-out refinance option. The VA interest rate reduction refinance loan, which has a streamlined application process and typically doesn’t require an appraisal, is available only to borrowers with current VA loans.

Additional reporting by Taylor Freitas