Refinancing FHA Loan To Conventional Loan To Eliminate FHA MIP

There are many reasons to refinance your mortgage loan.

• Refinancing from an FHA mortgage into a conventional loan is a very common practice
• This is a great opportunity to stop paying mortgage insurance and lower your monthly mortgage obligation
• This time will go down in history with some of the lowest interest rates ever seen
• Considering it was not out of the ordinary to have a 15% interest rate on your mortgage in the 1980s, seeing rates in the 2 and 3 percent is crazy
• In this blog, we will detail some advantages of refinancing your mortgage loan from an FHA loan to a conventional mortgage and explain the refinance process with Gustan Cho Associates

Refinancing FHA To A Conventional Mortgage With A Lender With No Overlays

Just like purchasing a home, many lenders have LENDER OVERLAYS on their refinance loan programs.

• The good news is Gustan Cho Associates offer conventional refinance mortgage loans based on FREDDIE MAC  and FANNIE MAE guidelines only
• No additional overlays
• We are experts in mortgage lending including all refinance options available
• Our loan officers will go over numerous refinance options with you
• We are available seven days a week to help you with your mortgage needs

For questions about your specific refinance transaction, please call Mike Gracz on (800) 900-8569 or email gcho@gustancho.com.

Benefits Of Refinancing FHA To A Conventional Mortgage

Why is refinancing into a conventional loan a good idea?

• We have seen property values rise over the past few years, helping many Americans drop their mortgage insurance premiums
• If your house has appreciated in value, and you are now at the 80% loan to value or less threshold, refinancing to a conventional loan is a great idea
• You will get rid of mortgage insurance premiums
• Saving you thousands over the life of the loan

And in today’s low rate environment, you should save even more money than usual.

The Refinance Mortgage Process

Applying for a refinance with Gustan Cho Associates is an easy process.

• Even during this chaotic mortgage market and mini refinance boom, refinancing your home is a simple process
• Your first step is to call Mike Gracz on (800) 900-8569
• Mike will detail your refinance options and make sure completing this transaction will have a financial benefit
• Mike will then pair you with a licensed loan officer in your state

It is important to discuss all refinancing goals with your loan officer.

Benefits Of Cash-Out Refinance 

There are numerous different ways to refinance your property.

• Sometimes it is in your best interest to take cash out
• Utilizing a portion of your equity to pay off other consumer debt or complete a project around the house
• There are times where it is better to complete a rate and term refinance to lower your overall payments on your property
• With these historically low interest rates, thousands of Americans are saving money on their home loans

This is a great time to take advantage.

Documents Required To Start The Refinance Mortgage Process

With modern technology, the refinance process has never been easier. After you speak with Mike Gracz, you will be sent an application link. Upon completion of the application link you will be required to upload income and asset documentation. Below is what you can expect to upload:

• Last 30 Days of Pay Stubs
• Last Two Years Tax Returns – not always required
• Last Two Years W2 or 1099s
• Current Mortgage Statement
• Homeowners Insurance Policy
• Driver’s License

Once your loan officer has the required documentation, they can get to work for you.

Refinancing FHA To A Conventional Mortgage: The Best Refinance Options

The licensed loan officer will prepare refinance options available to you based on your credit and equity position.

• You will formulate a plan that will best fit your financial goal
• After the application process, you will sign a loan disclosure package and start the process
• After you sign your initial disclosures, the mortgage processing team will order all required verifications and get your file ready for the underwriter
• During this time, an appraisal may need to be completed

As your file moves through the underwriting department, they will let us know if any further documentation is needed to close you refinance transaction.

Appraisal Waive On Conventional Loans

When financing into a conventional mortgage, it is possible to get an appraisal waiver.

• Based on your credit profile, documented assets, and equity position, you may be granted a waiver
• This will significantly speed up your refinance transaction
• We no longer need an appraiser to schedule the appointment and complete the report
• It is possible to get an appraisal waiver from Fannie Mae, Freddie Mac, or both

Refinancing Low-Interest Rate FHA Loans To Conventional Mortgages

The mortgage process cannot be completed overnight. It is a true process.

• Many homeowners who underwent the mortgage process do not want to repeat it
• The countless of documents required
• Some borrowers had underwriters who asked conditions after conditions
• Others had delays in the clear to close and closing date due to one reason or another
• Many homeowners who closed on their home loans in the past few years closed them with high mortgage rates
• Other borrowers had to close with FHA Loans and are currently paying high annual FHA Mortgage Insurance Premium

The good news for homeowners is that home prices have been increasing year after year since 2013.

Booming Economy And Housing Market

Many counties in the U.S. have seen home prices appreciate double digits year after year:

• The Federal Housing Finance Agency (FHFA) has increased conforming loan limits for three years in a row due to rising home prices
• HUD, the parent of FHA, has followed FHFA and increased FHA Loan Limits for three years in a row
• The increase, again, was due to high home prices
• Homeowners can take advantage of rising values of their homes in refinancing low-interest rate FHA Loans to Conventional Mortgages to avoid FHA MIP
• Mortgage rates have dropped to its lowest rates since the 2008 Real Estate and Credit Collapse
• Mortgage Rates are now at a 21 month low

In this blog, we will discuss Refinancing FHA Loans to Conventional Mortgages to avoid the high priced lifetime FHA mortgage insurance premium.

Benefiting By Refinancing Low-Interest Rate FHA Loans

There are times when homeowners will benefit by Refinancing Low-Interest Rate FHA Loans.

• For example, it may benefit Refinancing FHA Loans to a higher mortgage rate Conventional Loan if the borrower can eliminate the high FHA mortgage insurance premium
• Conventional Loans do not require private mortgage insurance if the borrower has 20% or more equity in their homes
• Refinancing Low-Interest Rate FHA Loans with a 3.5% rate may seem like a deal of a lifetime
• However, getting a conventional loan with a 4.0% mortgage rate and eliminating the annual 0.85% annual FHA MIP may offer a better net tangible benefit to the borrower
• FHA requires a 0.85% annual mortgage insurance premium for the life of a 30 year fixed rate loan
• A higher conventional mortgage rate may be a lower monthly payment without the FHA MIP
• This holds true for larger loan amounts where the 0.85% can make a large percentage of the monthly mortgage payment
• Homeowners should do a cost analysis in refinancing their FHA Loan to a conventional loan and avoiding MIP

Just because they have a low FHA rate does not mean they cannot benefit by Refinancing Low-Interest Rate FHA Loans to a higher rate conventional loan and avoid paying mortgage insurance.

FHA Loans are the most popular mortgage loans today.

• FHA Loans are not just for borrower’s with bad credit
• There are times where borrowers with great credit and stable income with job longevity needs to go with an FHA Loan instead of Conventional Loan
• This is often due to the fact that they may have a higher debt to income ratios, recent bankruptcy, recent foreclosure, recent short sale, recent deed in lieu of foreclosure, or other factors that affect them in qualifying for conforming loans
• The Federal Housing Administration, FHA, is a subsidiary of the United States Department of Housing and Urban Development ( HUD ), is in charge of all the rules and regulations of FHA Loans
• FHA does not originate nor fund FHA Loans
• FHA’s role is to insure FHA Loans that are originated and funded by FHA approved lenders
• FHA approved lenders are private lenders such as banks and mortgage bankers who are HUD-approved and meet all standards set by HUD
• What happens is lenders will originate, process, underwrite, and fund FHA loans as long as the borrower meets all of FHA lending guidelines
• Once lender funds the Home Loan, HUD will insure lenders in the event borrower defaults on his or her FHA Loan
• In order for FHA to insure lenders against borrower’s default, the Loan needs to have met all of the guidelines set by HUD when the Loan was originated and funded

In this article, we will discuss and cover Refinancing FHA Loan To Conventional Loan To Eliminate FHA MIP.

Refinancing FHA Loan To Conventional Loan: FHA Mortgage Insurance Premium

The biggest negative factor with FHA Loans is the pricey FHA mortgage insurance premium.

• FHA mortgage insurance premium is mandatory for all 30-year fixed rate FHA Loans
• This holds true regardless of the loan to value

There are two types of FHA mortgage insurance premiums

• The upfront FHA mortgage insurance premium of 1.75% of the loan balance is a one time charge that all borrowers have to pay but this cost can be rolled into the balance of the mortgage loan
• The second FHA mortgage insurance premium borrowers need to pay is the annual FHA mortgage insurance premium which is 0.85% of the mortgage balance
• The annual FHA mortgage insurance premium is held by lenders in an escrow account along with the homeowners insure

This is part of the borrower’s monthly mortgage payment:

• The only way it can be canceled is by paying off the FHA Loan or by Refinancing FHA Loan To Conventional Loan

The main reason most homeowners consider refinancing FHA Loan To Conventional Loan is mainly due to eliminating the pricey FHA Mortgage Insurance Premium to save money.

How Do I Go About Refinancing FHA Loan To Conventional Loan

If a homeowner purchased their home with an FHA Loan and can now qualify for a conventional loan, they can consider whether it will benefit them by refinancing FHA Loan To Conventional Loan.

• One of the most important factors with conventional loans is that they are credit-sensitive unlike FHA Loans
• For example, for borrowers to get the best mortgage rates, they need a 740 credit score with at least 20% equity in their home
• The lower the credit scores, the higher the mortgage rates will be
• The fewer equity homeowners have, the higher the rates
• Any conventional loan with less than 20% equity will require private mortgage insurance

However, unlike FHA Loans, if the home appreciates in value and homeowners have at least 20% or more in equity due to appreciation of their home, private mortgage insurance can be canceled.

Other Reasons For Homeowners To Refinance

Why refinance FHA Loan To Conventional Loan if homeowners still have to pay for private mortgage insurance and still have less than 20% equity in their home?

• The reason is that private mortgage insurance premiums are a fraction of the 0.85% annual FHA mortgage insurance premium for borrowers with higher credit scores
• Private mortgage insurance can be canceled once homeowners have 20% equity in their home

With FHA’s annual mortgage insurance premium, the mortgage insurance cannot be canceled no matter how much equity homeowners have.

Conventional Mortgage Rates Versus FHA Mortgage Rates

FHA mortgage rates are substantially lower than conventional mortgage rates. This is because FHA loans are insured by the Federal Housing Administration against the borrower’s default. Although conventional mortgage rates may be higher than FHA mortgage rates, it may be beneficial for homeowners to refinance FHA Loan To Conventional Loan due to the high FHA annual mortgage insurance premium. The loan officer will go over a full comparison and analysis to see whether Refinancing FHA Loan To Conventional Loan will be beneficial to homeowners. In order to be able to refinance a homeowner, the homeowner needs to get a net tangible benefit from refinancing. Loan officers can go over how much money borrowers can save over the term of their mortgage loan. Homeowners considering refinancing FHA Loan To Conventional Loan should contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We can run a free analysis for homeowners and get a full net tangible benefit analysis. Borrowers lower credit scores, we advise them on maximizing their credit scores prior to refinancing FHA Loan To Conventional Loan so they can get the best conventional mortgage rates.