Refinancing from an FHA loan to a conventional mortgage can be a smart financial move—especially if it helps you lower your monthly payment, eliminate mortgage insurance, or access home equity.
Many homeowners start with an FHA loan due to its lower credit score and down payment requirements, but over time, switching to a conventional loan can provide better long-term benefits, including the option to cancel mortgage insurance.
In this article, we’ll explore the ins and outs of refinancing an FHA loan to a conventional loan.
The least you need to know:
- FHA loans can be refinanced to conventional loans, provided the borrower(s) meet conventional lending guidelines.
- Refinancing FHA to conventional can come with various benefits, including the option to cancel mortgage insurance, which is less likely and sometimes unavailable with an FHA loan.
- Refinancing should provide a net tangible benefit to the borrower, such as a lower interest rate, access to home equity as cash, etc.
Can You Refinance an FHA Loan to a Conventional Loan?
Yes, you can refinance an FHA loan to a conventional loan as long as you meet conventional lending guidelines.
FHA loans are popular among borrowers who may not qualify for a conventional loan due to credit or debt-to-income (DTI) ratio limitations. So, if that describes you, qualifying for a conventional loan may require some improvements in your financial profile since you initially took out the FHA loan. Here’s a quick comparison of FHA and conventional refinance requirements:
| FHA | Conventional | |
| Credit Score | 500 for a 10% down payment580 for a 3.5% down payment | Typically 620 or higher |
| DTI Ratio | Up to 56.9% | Typically 43 – 50% |
| Equity | 3.5% for rate-and-term20%+ for cash-out | 3 – 5% for rate-and-term20%+ for cash-out |
If you meet the conventional loan requirements, you may be able to refinance your FHA loan to a conventional loan. It’s important to note that each lender can impose stricter rules on their loans.
Other conventional loan requirements include:
- Documented income
- Enough in your checking or savings accounts to pay for closing costs unless you have adequate equity to roll those into the new conventional loan
Your lender will likely require a similar amount of supporting paperwork to what you provided for your FHA loan application, plus proof of homeowner’s insurance.
It will also need an appraisal of the home, typically at your expense. Appraisal fees are a normal part of closing costs.
Be sure to get quotes from multiple lenders for any sort of refinance. Just as with all mortgage applications, you can save thousands of dollars by hunting down your best possible deal.
Once you’ve chosen your lender, the refinance process is very similar to that for mortgage applications.
Why Refinance an FHA Loan to a Conventional Mortgage?
The biggest advantage? Getting rid of FHA mortgage insurance. FHA loans require mortgage insurance for at least 11 years—or even the entire life of the loan if you put less than 10% down. Conventional loans, on the other hand, allow you to drop private mortgage insurance (PMI) once you reach 20% equity, reducing your overall costs.
Benefits of Refinancing
The great thing about all refinances is that they’re a simple matter of math. You’re asking yourself four questions:
- Will the refinancing make me better off?
- By how much?
- If I’m making savings (as opposed to taking cash), when will my savings pay for my closing costs, i.e., when will I break even?
- Do the savings I’m making or the cash I’m taking out make this refi worthwhile?
You’re working with ballpark figures to begin with. You just want to decide whether the refinance is worth exploring further. Our refinance calculator can do the hard math for you.
But, once you get loan estimates from multiple lenders and pick the best one, you’ll work with pretty solid figures. A lender needs very good reasons to revise a loan estimate once it’s issued and you’ve locked your rate.
Cons of Refinancing
The main con of refinancing is the upfront closing costs, which are typically 2-5% of the loan amount. So, on a $300K loan, you could pay between $6,000 and $15,000 to refinance.
But, ideally, the savings you’ll get from a lower monthly payment should help you recover that cost within a reasonable timeframe, known as the break-even point.
Break-Even Point
The break-even point is an important part of your refinance math since it is the time it takes for the savings on your new mortgage to make up for the upfront costs of refinancing. Closing costs on a refinance are typically 2-5% of the loan amount.
So, let’s say you’re refinancing a $300K mortgage. Your closing costs could be anywhere from $6,000 to $15,000. If your refinance saves you $300 per month in interest and mortgage insurance costs, your break-even point would be between 20 months (6,000 / 300 = 20) and 50 months (15,000 / 300 = 50).
Recovering the upfront costs in twenty months is likely well worth it, assuming you plan to be in the house for longer than that. A 50-month break-even period may still make sense for homeowners who plan to stay put for several years or want to remove FHA mortgage insurance.
Not All Refinances Involve Lowering Your Monthly Payment
There are some refinance cases where you’re not lowering your monthly payment. These cases are typically in the form of cash-out refinances or where you’re shortening your term to pay off your loan sooner.
With a cash-out refinance, you’re increasing your mortgage balance in exchange for cash in hand. Ideally, the payoff here is that you use the cash for something that will pay off in the long run, like home improvements or even investing in another property.
The savings from a shortened loan term come in the form of long-term savings, where you pay less lifetime interest and gain equity faster.
How Soon Can You Refinance an FHA Loan?
As mentioned above, FHA loans come with seasoning requirements before you can refinance. Typically:
- FHA streamline: 210 days since you closed the loan/6 months of on-time payments
- FHA cash-out refinance: 12 months of on-time payments
Conventional loans have more relaxed rules:
- Rate-and-term: No official seasoning period, up to the lender
- Cash-out refinance: Typically 6 – 12 months
When Should You Refinance FHA to Conventional?
Timing your refinance right is crucial, but it all depends on your unique situation, the goal of refinancing, and whether or not you qualify.
If you’re trying to save money by lowering your interest rate, lowering it by 1% is often a good rule of thumb to strive for. We wrote a guide on whether or not it’s worth refinancing for 1% where we break the math down in further detail. We also wrote a guide on when to refinance, which further details how to time your refinance.
If you’re refinancing to access home equity, your interest rate is likely not the main factor in your decision, but it’s still important. If you can time your cash-out refinance with interest rates, you get cash-out and a better rate.
How Should an FHA-To-Conventional Refinance Improve Your Loan?
There are two main ways in which you might financially benefit from any refinance:
- Rate-and-term — You reduce your monthly payment by getting a lower interest rate or by extending the period you pay down the borrowing on your home.
- Cash-out — You walk away from closing with a lump sum, which you can spend on anything you like. Many use these for home improvements or debt consolidation.
In the past couple of years, few people have been refinancing. Mortgage rates are near two-decade highs, and most people cannot get a mortgage rate lower than the one they are already paying.
Still, the Mortgage Bankers Association reported that all forms of refinance were 26% higher in the week ending Jun. 21, 2024 than the same week one year earlier. That month, it expected the percentage of all mortgage applications that are refinances to keep growing through 2024 and 2025.
That’s partly because many experts expect mortgage rates to fall in the future and partly because of continuing demand for cash-out refinances and those that extend mortgage terms.
How we source rates and rate trends
Rates based on market averages as of Dec 02, 2025.Product Rate APR 30-year Fixed Fha Refinance 5.56% 6.77% 30-year Fixed Refinance 6.35% 6.37%
Eliminating Mortgage Insurance Can Make the Refinance Worth It
An important difference between FHA and conventional loans can make refinancing from the first to the second irresistible. That difference is mortgage insurance, referred to as Mortgage Insurance Premiums (MIP) for FHA loans and Private Mortgage Insurance (PMI) for conventional loans.
Anyone with a down payment lower than 20% on a conventional loan will likely pay PMI. It does nothing for you apart from allowing for lower down payments. But, it insures the lender if you default.
However, you can request that your lender remove PMI once the balance on your conventional mortgage is 80% or less than your home’s value (i.e. you have 20% equity). Lenders must automatically cancel PMI when your loan balance reaches 78% of its original amount, provided you’re current on payments.
You have to pay mortgage insurance on an FHA loan for the life of the loan if you put down less than 10%. If you put down 10% or higher and closed the loan on or after June 3, 2013, you’ll have to pay MIP for 11 years.
In many cases, the only way to avoid MIP is to refinance to a conventional mortgage.
Even if you refinance into a conventional mortgage with less than 20% equity, that fee can still be canceled once you reach 20%. If you forget to call your lender and request that they cancel PMI, it will automatically drop off at 22% equity.
How Much Is Mortgage Insurance on an FHA Loan?
In 2025, most borrowers pay 0.55% of the loan amount each year. So, if you borrowed $300,000, you would pay $1,650 a year or $137 per month.
Borrowers also pay an upfront MIP of 1.75% of the loan amount, which you can roll into the loan balance. If rolled into the loan, the 1.75% upfront MIP on a $300,000 FHA loan adds approximately $14.58 per month over a 30-year term—not including any additional interest charged on this amount.
That totals almost $152 per month for FHA mortgage insurance.
We’d all like to save $152 a month. But it will only make financial sense if the mortgage rate you’ll pay on your conventional loan isn’t so much higher than your current FHA one that your monthly payment rises by more than you can save.
As we said, refis are all about the math.
You don’t have to wait to refinance until your mortgage balance dips below 80% of your home’s value. You can refinance an FHA loan to a conventional mortgage with as little as 3-5% equity, depending on the lender’s requirements. For cash-out refinances, you’re looking at 20% equity or more usually.
But you won’t avoid mortgage insurance until you reach 20-22% equity, depending on your mortgage servicer’s rules at the time.
Is It Worth It to Refinance From an FHA to a Conventional Loan?
It rarely makes sense to refinance to a higher mortgage rate than the one you’re currently paying. But, if the difference is very small, escaping mortgage insurance might tilt the calculation.
If you urgently need cash, paying a higher rate for a cash-out refinance can be necessary.
When this article was written, mortgage rates were close to 21st-century highs. However, many expert economists expected them to fall soon.
Each small decrease in mortgage rates increases the number of homeowners for whom all refinances — and especially an FHA loan to a conventional mortgage refinance — make sound financial sense.So, why not explore your options now? Get started with a quote from Refi.com.
