Can You Switch from an FHA Loan to Conventional?
The short answer is yes, you can switch from an FHA loan to a conventional loan. But before we delve deeper, let's first understand what these two types of loans are and how they differ.
FHA Loans vs. Conventional Loans
The Federal Housing Administration (FHA) insures FHA loans, which are designed for low-to-moderate income borrowers. These loans require a lower down payment of 3.5%, and have more lenient credit score requirements than conventional loans.
Conventional loans, on the other hand, are not backed by the government and are designed for borrowers with good credit scores and stable income. These loans typically require a higher down payment of at least 5% and have stricter credit score requirements.
Reasons for Switching from FHA to Conventional
There are several reasons why someone might consider switching from an FHA loan to a conventional loan:
Improved credit score: If your credit score has improved since you first took out your FHA loan, you may be able to qualify for a conventional loan with a lower interest rate and better terms.
Removal of mortgage insurance premium (MIP): FHA loans require borrowers to pay for mortgage insurance premiums, which can add up over time. Conventional loans do not require this additional expense once you have at least 20% equity in your home.
Steps to Switching from FHA to Conventional
If you're considering switching from an FHA loan to a conventional loan, here are the steps you'll need to take:
Check your credit score and make sure it meets the requirements for a conventional loan.
Get an appraisal of your home to determine its current value.
Calculate how much equity you have in your home by subtracting your outstanding mortgage balance from its appraised value.
Shop around and compare rates from different lenders to find the best deal on a conventional loan.
Apply for the conventional loan and provide all necessary documentation to the lender.
Once approved, use the funds to pay off your FHA loan.
Benefits of Switching to a Conventional Loan
Switching from an FHA loan to a conventional loan can offer several benefits, including:
No mortgage insurance premium (MIP): Once you have at least 20% equity in your home, you will no longer be required to pay for mortgage insurance premiums with a conventional loan.
More flexible terms: Conventional loans offer more options for loan terms, such as 10, 15, 20, or 30 years, whereas FHA loans only offer a 30-year term.
Choose Mortgage Brokers Pro for Your Loan Needs
If you're considering switching from an FHA loan to a conventional loan, Mortgage Brokers Pro can help. Our team of experienced loan officers can guide you through the process and help you find the best loan terms for your unique needs.
At Mortgage Brokers Pro , we offer competitive rates, flexible terms, and excellent customer service. Contact us today to learn more about our loan options and how we can help you switch from an FHA loan to a conventional loan.