How to Refinance From FHA to Conventional Loan

If you currently have an FHA loan, you may be paying a mortgage insurance premium (MIP) every single month with no clear path to removing it. Refinancing from an FHA loan to a conventional loan is one of the most common ways homeowners eliminate that ongoing cost and potentially secure a lower interest rate at the same time.

This guide walks you through exactly how to refinance your FHA loan to a conventional mortgage, including the requirements, the step-by-step process, the costs involved, and when it does and does not make financial sense.

Can You Refinance an FHA Loan to a Conventional Loan?

Yes. There is no rule preventing you from refinancing from an FHA loan to a conventional loan. This type of transaction is called a rate-and-term refinance, because you are replacing your current mortgage with a new loan that has different terms, a different rate, or both.

You can also do a cash-out refinance from FHA to conventional if you want to tap your home equity at the same time. However, a cash-out refinance typically comes with a slightly higher interest rate and stricter qualification standards.

According to the Consumer Financial Protection Bureau, you should always shop at least three to five lenders before choosing a refinance loan, as rates and fees can vary significantly. You can compare refinance lenders on Wirly to see current options side by side.

Why Refinance from an FHA Mortgage to a Conventional Loan?

The number one reason homeowners refinance from an FHA to a conventional loan is to get rid of FHA mortgage insurance. Here is why that matters.

FHA Mortgage Insurance Is Usually Permanent

FHA loans require both an upfront mortgage insurance premium (1.75% of the loan amount) and an annual MIP that is divided into monthly payments. For most borrowers who put less than 10% down, FHA loans require this mortgage insurance premium for the life of the loan. That means it never goes away unless you refinance into a different type of loan.

Conventional PMI Can Be Removed

A conventional mortgage also requires private mortgage insurance (PMI) if you put less than 20% down. But here is the critical difference: PMI on a conventional loan can be removed once you reach 20% equity. Under the Homeowners Protection Act, your servicer must automatically cancel PMI when you reach 22% equity. With an FHA loan, you do not get that option.

Other Potential Benefits

• Lower interest rate: If rates have dropped since you got your FHA loan, or if your credit score has improved significantly, you may qualify for a lower interest rate on a conventional mortgage.
• Lower monthly mortgage payment: Between eliminating MIP and potentially getting a better rate, your total payment could drop substantially.
• Shorter loan term: You can refinance to a 15-year or 20-year loan term to pay off your home faster and save on total interest.
• No FHA loan limits: Conventional loan limits are often higher than FHA limits in many counties, giving you more flexibility.

Requirements to Qualify for a Conventional Loan

Before you can refinance your FHA loan to a conventional mortgage, you need to meet the lender’s requirements. Here is what most lenders look for.

Credit Score

Most lenders require a minimum credit score of 620 to qualify for a conventional loan. However, to get the best interest rates and avoid additional pricing adjustments, a score of 740 or higher is ideal. According to CFPB guidance, checking your credit reports for errors before applying can help you ensure your score accurately reflects your history.

Home Equity

You need at least 20% equity in your home to avoid paying PMI on your new conventional loan. If you have between 5% and 19.99% equity, you can still refinance to a conventional loan, but you will pay PMI until you reach 20%. Use the refinance calculator to estimate your current equity position.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio measures your total monthly debt payments divided by your gross monthly income. Most lenders want to see a DTI below 45% to 50% for a conventional loan, though lower is better for securing favorable terms.

Stable Income and Employment

Lenders typically want to see at least two years of consistent employment and income history. You will need to provide W-2s, tax returns, and recent pay stubs as part of your refinance loan application.

Seasoning Requirements

Some lenders require that you have made at least 6 to 12 months of payments on your current mortgage before they will approve a refinance. This is known as a seasoning requirement.

How to Refinance Your FHA Loan to a Conventional Mortgage: Step by Step

Step 1: Check Your Current Numbers

Before you contact a single lender, gather the following information about your current mortgage:

• Your remaining loan amount and current interest rate
• Your monthly mortgage payment, including MIP
• Your home’s estimated current value (check recent comparable sales in your area)
• Your credit score from all three bureaus

Step 2: Calculate Your Break-Even Point

Refinancing is not free. Closing costs on a refinance typically run 2% to 5% of the new loan amount. Divide your total closing costs by your monthly savings to find your break-even point. If it takes 36 months to break even but you plan to move in 24 months, refinancing does not make sense. Use the break-even calculator to run your numbers.

Step 3: Shop Multiple Lenders

Contact at least three to five lenders and request Loan Estimates from each. According to the CFPB, you can shop for rates within a 14-day window without multiple hard credit inquiries significantly affecting your score. Compare the interest rate, APR, closing costs, and any lender credits carefully. You can start by reviewing Wirly’s refinance lender comparisons.

Step 4: Submit Your Application

Once you choose a lender, you will complete a full refinance loan application. Be prepared to submit documentation including pay stubs, W-2s, bank statements, tax returns, and your current mortgage statement. A loan officer will guide you through the specific requirements.

Step 5: Get an Appraisal

Your lender will order a home appraisal to confirm your property’s current market value. This is a critical step because it determines how much equity you have and whether you can avoid PMI. Appraisal fees typically range from $300 to $600.

Step 6: Review and Close

If everything checks out, you will receive a Closing Disclosure at least three business days before your closing date. Review it carefully and compare it to your original Loan Estimate. At closing, you sign the paperwork, and your new conventional loan pays off and replaces your old FHA loan.

Pros and Cons of Refinancing from an FHA to a Conventional Loan

Pros

• Eliminate FHA mortgage insurance that lasts for the life of the loan
• Potentially secure a lower interest rate
• PMI on a conventional loan can be removed at 20% equity
• Option to choose a shorter loan term and build equity faster
• More flexibility with loan amounts and property types

Cons

• Closing costs of 2% to 5% of the loan amount
• Higher credit score requirements than FHA loans
• Need a home appraisal, which costs money and may come in lower than expected
• If you have less than 20% equity, you will still pay PMI (though it is removable)
• Restarting a new loan term resets your amortization schedule

Risks and Considerations

This section is important. Refinancing is not always the right move. Before you proceed, consider these potential downsides.

Resetting Your Amortization Clock

If you are five years into a 30-year FHA loan and refinance to a new 30-year conventional loan, you are starting over. That means more of your early payments go toward interest rather than principal. Consider whether a shorter loan term makes sense to offset this.

Break-Even May Take Years

Closing costs add up. If your monthly savings are modest, it could take four to five years before the refinance pays for itself. If you plan to sell your home before reaching that break-even point, refinancing from an FHA loan could actually cost you money.

Hidden Costs Borrowers Commonly Miss

• Appraisal fees: $300 to $600, and the appraisal may not support your expected home value.
• Title insurance: Often required again for a new loan, even if you purchased it recently.
• Prepayment penalties: Rare on FHA loans but worth checking on your current mortgage.
• Escrow adjustments: You may need to fund a new escrow account at closing.

Credit Score Impact

Applying for a refinance triggers a hard inquiry on your credit report. While shopping within a short window minimizes the impact, multiple applications over a long period can temporarily lower your score. According to CFPB guidance, it is best to do all your rate shopping within a focused 14-day period.

Rate Lock Risks

When you lock your interest rate, that lock has an expiration date, typically 30 to 60 days. If your closing is delayed, you may lose the locked rate and need to either extend (for a fee) or accept a potentially higher rate. Ask your lender about float-down options that protect you if rates drop after you lock.

Common Complaints to Watch For

According to CFPB complaint data from 2024, the most common mortgage-related complaint is trouble during the payment process, which accounted for the majority of complaints across all major servicers. Issues during the refinance application process were also frequently reported. To protect yourself, keep copies of all documentation, confirm payment transfers between your old and new servicer, and get all terms in writing.

Alternatives to Refinancing Your FHA to a Conventional

If you do not yet qualify for a conventional loan, you still have options.

• FHA streamline refinance: An FHA streamline refinance lets you refinance your FHA loan to a new FHA loan with less paperwork and no appraisal requirement. This will not eliminate MIP, but it could lower your interest rate and monthly payment.
• Wait and build equity: If you are close to 20% equity, waiting 6 to 12 months could put you in a much stronger position to refinance to a conventional loan and skip PMI entirely.
• Home equity loan or HELOC: If your main goal is accessing cash rather than eliminating MIP, a home equity loan or home equity line of credit may be less expensive than a full cash-out refinance.

FAQ

How long do I have to wait to refinance from FHA to conventional?

There is no federal waiting period to refinance an FHA loan to a conventional loan, but most lenders require at least 6 to 12 months of payment history on your current mortgage. You also need to have enough equity and meet credit requirements to qualify for a conventional loan.

Will I get a lower interest rate by refinancing from FHA to conventional?

It depends on current market conditions and your credit profile. According to Freddie Mac’s weekly Primary Mortgage Market Survey, conventional rates fluctuate weekly. If your credit score has improved since you took out your FHA loan, you may qualify for a lower interest rate. Even if the rate is similar, eliminating MIP often reduces your total monthly payment.

How much equity do I need to refinance from FHA to conventional without PMI?

You need at least 20% equity in your home to avoid paying private mortgage insurance on a conventional loan. If your home is worth $300,000, that means your remaining loan amount must be $240,000 or less.

Is an FHA streamline refinance better than switching to conventional?

It depends on your goals. An FHA streamline refinance is faster, requires less documentation, and does not need an appraisal. But it keeps you in an FHA loan with MIP. If your goal is to eliminate mortgage insurance entirely, refinancing to a conventional loan is the better path, provided you have enough equity and a strong credit score.

What are the closing costs to refinance from FHA to conventional?

Closing costs typically range from 2% to 5% of the new loan amount. On a $250,000 refinance loan, that is roughly $5,000 to $12,500. These costs include lender fees, appraisal fees, title insurance, and other charges. Some lenders offer no-closing-cost options, but these usually mean a higher interest rate.

The Bottom Line: Know Your Options Before Refinancing

Refinancing from an FHA to a conventional loan can be a smart financial move if you have built enough equity and have a solid credit profile. Eliminating FHA mortgage insurance that sticks with you for the life of the loan can save thousands of dollars over time. But the decision is not automatic. Always calculate your break-even point, compare offers from multiple lenders, and consider the full picture of costs and risks.

Start by checking what you qualify for and running your numbers through Wirly’s refinance calculator to see if the switch makes sense for your situation.

Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice. Wirly is not a lender or mortgage broker. Consult with a qualified loan officer or financial advisor before making refinancing decisions.

Published by the Wirly Editorial Team. This article was drafted using AI writing tools and reviewed for accuracy by our editorial team. All data claims have been verified against the sources listed below.

Sources

• Consumer Financial Protection Bureau (CFPB) – Guidance on mortgage loan options, refinancing, and shopping for lenders
• CFPB Consumer Complaint Database – 2024 mortgage complaint data referenced for servicer complaint patterns
• Freddie Mac Primary Mortgage Market Survey – Weekly mortgage rate data referenced for conventional rate context
• U.S. Department of Housing and Urban Development (HUD) – FHA mortgage insurance premium requirements and policies
• CFPB – Private Mortgage Insurance Removal – Homeowners Protection Act and PMI cancellation rules

Sources

• CFPB (Consumer Financial Protection Bureau) – Official consumer protection guidelines and mortgage resources
• Freddie Mac Primary Mortgage Market Survey – Weekly benchmark mortgage rate survey dating to 1971

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Written by the Wirly Editorial Team. Last reviewed: March 30, 2026. Fact-checked against CFPB guidelines, CFPB complaint data 2024, Freddie Mac PMMS, HUD FHA MIP policies. See our methodology for how we evaluate lenders.