Refinance FHA loan to Conventional loan

FHA refinance to conventionalI often have past clients who purchased their home in Phoenix with an FHA loan ask me about the current estimated value of their home because they are considering refinancing an FHA loan into a conventional loan. Why should you also look into this? To save money every month!

Homeowners who purchased a house using an FHA loan most likely put 3.5% of the purchase price as a down payment. In order to make the lender comfortable with a reduced down payment, this buyer was required to carry mortgage insurance for the life of the FHA loan. How much does mortgage insurance cost? It’s calculated as a function of the size of the loan and the borrower’s credit score (FICO) but typically runs about $200 per month for an FHA loan of $275,000 with a FICO of 700. The monthly mortgage insurance premium declines as the loan balance is paid down, but still amounts to $30,000 for the life of the FHA mortgage in this example!

To qualify for a conventional loan, borrowers must put down 20% of the purchase price of the home. If they go the FHA route of 3.5% down, they will need to contact their lender when they believe they have now built up 20% or more equity in the home. How do you build 20% or more equity? By either paying down the loan balance so the loan to value ratio is less than 80% (it started out at 96.5% in FHA scenario) and/or by having the home value increase. With Phoenix home values up substantially in recent years, if you purchased your home with an FHA loan, odds are you are in a great situation to refinance out of your FHA loan into a conventional loan.

I urge you to contact your lender to inquire about making this change to save thousands of dollars. If you are unsure of your home’s current value to assist in determining if your loan to value ratio is below 80%, request your no-cost and no-obligation Phoenix home value estimate from me. I do not need to visit your home and you will receive your report from me within 24 hours to present to your lender to see if you qualify for an FHA refinance.

Buyer Questions To Ask Lender

buyer questions to ask lender
Ten important questions a potential home buyer should ask their prospective mortgage lender:

1. What is the interest rate for the loan? Keep in mind, the interest rate is tied to the loan type, amount of down payment and borrower’s credit score.

2. What is the loan origination fee? If desired, this can be added to the loan amount.

3. What are the expected lender closing costs? While an agent can advise buyers on these estimated costs, by law a lender is required to provide a good faith estimate to know the total cash required, including down payment and all closing costs.

4. What is your rate lock period and how long is the commitment valid? Interest rate locks vary, so find out if this commitment works both ways in case rates go down during the lock.

5. Is there a prepayment penalty? Most loans do not have prepayment penalties, but second loans often do.

6. What is the total monthly payment and what does it include? It should include principal payment, interest, property taxes, homeowners insurance and mortgage insurance (if any). Typically HOA fees (if any) are paid separately.

7. What is the most important factor in analyzing my credit? FICO score is the method used to evaluate credit and many lenders also place importance on payment history and employment history.

8. What paperwork is required to apply for and obtain the loan? Get an explanation of all documents needed during all steps in processing the loan.

9. What is the loan processing time? Even with new government guidelines, loans take about 30 days to close however FHA and VA loans may take a bit longer.

10. What delays could occur and what can be done to avoid them? Experienced lenders should know potential pitfalls and underwriting red flags.

Fannie Mae Loan Lookup


Use this no-cost Fannie Mae Loan Lookup tool that enables borrowers to determine if Fannie Mae owns their loan by providing a street address and ZIP code.

If you have questions about the program that your loan servicer cannot answer or need debt counseling, you can call the Homeowner’s HOPE Hotline at 1-888-995-4673. The hotline can help with questions about the loan modification program and offers free HUD-certified mortgage counseling services in English and Spanish.

The Fannie Mae Loan Lookup is provided as a free tool for borrowers. A search that results in a match found does not imply you will qualify for a Making Home Affordable mortgage refinance or loan modification. You should contact your mortgage lender to verify these results.

Andrew Robb - RE/MAX Fine Properties, 21020 N Pima Rd, Scottsdale AZ 85255