How to Refinance an FHA Loan to Conventional (Remove PMI)

If you bought your home with an FHA loan, you’re likely paying mortgage insurance premiums (MIP) every month—and in many cases, for the life of the loan. That’s why so many homeowners eventually ask:

“How do I refinance my FHA loan into a conventional loan so I can remove PMI?”

The good news:

Switching from FHA to conventional financing may lower your monthly payment, eliminate MIP, and help you build equity more efficiently.

This guide walks you through why, when, and how to refinance from FHA to conventional—and how to make sure you don’t overpay in the process.

Key Takeaways

✅ You can remove FHA mortgage insurance ONLY by refinancing into a conventional loan.

✅ You typically need 20% equity (80% LTV) to avoid PMI on the new loan.

✅ A new appraisal will determine whether you meet the equity requirement.

✅ You’ll need strong enough credit to qualify for the best conventional rates.

✅ Upload your Loan Estimate to Fincast — vetted lenders can provide competitive offers so you can compare options and potentially save money.

💡Pro Tip: No matter what type of loan you choose, upload your Loan Estimate to Fincast to instantly benchmark your offer against offers from vetted lenders. You can compare your options side-by-side and either switch lenders or negotiate a better deal based on the findings. Fincast helps you avoid unnecessary fees and inflated rates that some refinance offers have.

Why Refinance from FHA to Conventional?

✔ 1. Remove FHA Mortgage Insurance (MIP)

Most FHA borrowers pay lifetime mortgage insurance unless they refinance out of it.

MIP costs:

• 0.55% annually for most borrowers

• Cannot be removed by home appreciation alone

Switching to a conventional loan with 20% equity eliminates MIP forever.

✔ 2. Lower Your Monthly Payment

Even if your interest rate stays the same, removing MIP may reduce your payment.

✔ 3. Qualify for Better Loan Terms

A conventional refinance may allow:

• Lower rates (depending on your credit)

• Shorter loan terms (e.g., 15-year)

• More flexible options for future cash-out refinances

When Can You Refinance an FHA to a Conventional Loan?

You can refinance at any time, but to remove PMI entirely, you need:

✔ 20% equity (80% LTV)

Achieved through:

• Appreciation

• Amortization

• Improvements to the home

✔ A strong credit profile

The best conventional pricing kicks in around:

• 700–740+ credit score (exact requirements vary by lender)

Many lenders require a minimum credit score of 620, but again, it varies by lender. Good credit scores also help minimize your PMI costs if your LTV is greater than 80%.

✔ Stable income and acceptable DTI

Most lenders want:

• DTI ≤ 45% (some go to 50%)

The exact requirements vary by lender. Some are more flexible with debt-to-income ratios than others. If you have a higher-than-average DTI, be sure to shop around to find a lender that not only accepts your situation but also offers the most competitive rates and terms.

💡Pro Tip: Use Fincast to verify whether you have the most competitive deal for your situation.

✔ A new appraisal

The new home value determines whether you have enough equity to remove PMI.

How Much Equity Do You Need?

To avoid PMI, conventional loans require:

📌 At least 20% equity → 80% LTV

Example:

• Home value: $400,000

• Max loan @80% LTV: $320,000

• If your current FHA balance is $315,000 → you have enough equity to remove PMI when refinancing.

What happens if you have less than 20% equity?

You can still refinance to a conventional loan—but you’ll have PMI temporarily. However, conventional PMI falls off automatically once you reach 78% LTV through payments. If your property appreciates enough to give you an LTV of 80% or less, you can request cancellation of PMI, but whether you can is at the lender's discretion.

Step-by-Step: How to Refinance FHA to Conventional (Remove PMI)

1. Determine Your Home’s Current Value

Because PMI removal depends on LTV, this is the most important step.

Use:

• Recent sales comparisons

• Online value estimators

• Realtor Comparative Market Analysis

• A pre-refi appraisal estimate

2. Estimate Your Current LTV

Use the formula:

LTV = Current Loan Balance ÷ Home Value

You need:

• 80% LTV to remove PMI

• ≤ 97% LTV to qualify for some conventional refinances (with PMI)

3. Check Your Credit Score

Your credit score plays a major role in:

• Your interest rate

• Your PMI pricing (if applicable)

• Whether refinancing makes sense

Ideal: 700+

Minimum: 620

• Exact requirements vary by lender.

💡 FHA borrowers often see big credit score jumps after a few years of on-time payments—making this a great time to switch to conventional.

4. Calculate Your Debt-to-Income Ratio (DTI)

Most lenders want:

• ≤ 45% (conventional requirement)

• Strong borrowers may qualify with up to a 50% DTI

If your DTI is high, small strategic debt payoffs can help.

5. Apply for a Conventional Refinance

You’ll need:

• Income documentation

• Credit check

• A full appraisal (in most cases)

You’ll receive a Loan Estimate, which shows:

• Interest rate

• PMI (if applicable)

• Closing costs

• Your new monthly payment

💡Pro Tip: Upload your Loan Estimate to Fincast to determine whether your offer is the most competitive available, given your situation.

6. Complete the Appraisal

The appraisal value determines your ability to remove PMI.

If the home appraises:

• Higher than expected → you may remove PMI

• Lower than expected → PMI may stay temporarily

Either way, conventional PMI is cancellable—FHA MIP is not.

7. Close on Your New Conventional Loan

Your FHA loan is paid off, your new loan begins, and—if you have 20% equity—your monthly MIP disappears permanently.

FHA vs Conventional Refinance: Side-by-Side Comparison

When Switching from FHA to Conventional Makes the Most Sense

✔ You now have 20% equity

This is the #1 time homeowners move from FHA → conventional.

✔ Your credit score has significantly improved

You may now qualify for better financing terms.

✔ You want to remove expensive MIP

This can save a significant amount of money monthly and over the life of the loan.

✔ You’re planning a cash-out refinance later

Conventional loans offer more flexibility for future refinances.

✔ You want a shorter-term mortgage

Conventional 15-year loans often have lower rates.

When You Should Not Refinance to Conventional

❌ Your rate would increase significantly

If today’s rates are much higher than your current FHA rate, refinancing could cost more—especially if your equity is under 20% and PMI would apply temporarily.

❌ Your credit is still weak

FHA loans often remain better until your score improves.

❌ You plan to move soon

Refinancing fees may not be worth the payoff period.

How Much Can You Save by Removing FHA MIP?

Example:

• FHA loan: $350,000

• Annual MIP: 0.55% → ~$160/month

• New conventional loan: No PMI if at 20% equity

Annual savings: ~$1,920

5-year savings: ~$9,600

10-year savings: ~$19,200+

For many homeowners, this alone makes refinancing worthwhile.

How Fincast Helps You Refinance From FHA to Conventional (Remove PMI) 🚀

Conventional refinance pricing can vary widely across lenders, and the difference between offers can be thousands in closing costs and interest.

Fincast helps you get the best possible deal through:

1️⃣ Upload your Loan Estimate (no extra credit pull)

2️⃣ Fincast analyzes your rate, PMI, fees, and APR

3️⃣ Vetted lenders quietly compete to beat your offer

4️⃣ You choose the best loan—or confirm your offer is already competitive

💡 Pro Tip: Even a slightly lower rate + PMI removal can save you a significant amount annually.

FAQs

1. Can I remove FHA MIP without refinancing?

Usually no—unless you put 10% down and wait 11 years, but many homeowners still refinance sooner if they can qualify for better conventional pricing. Otherwise, refinancing is the only option.

2. Can I refinance an FHA to a conventional loan with less than 20% equity?

Yes, but you’ll have PMI temporarily. It will drop off automatically once you reach 78% LTV or you can request it when you hit 80% LTV.

3. Do I need an appraisal to switch to conventional?

Yes—your new LTV depends on your home’s current value.

4. Is PMI cheaper than FHA MIP?

It depends on your credit score and loan amount.

5. How soon can I refinance out of FHA?

For FHA Streamline refinances, the FHA requires six on-time payments and 210 days since you originally took the loan. This rule does not apply to conventional refinances, though. Technically, you can refinance to a conventional loan at any time, assuming you qualify.

Bottom Line

Refinancing from an FHA loan to a conventional mortgage can be a smart move for homeowners —especially when they’ve gained equity or improved their credit. It's the most effective way to eliminate costly MIP and secure better long-term financial flexibility.

You’re in the strongest position when:

✅ You have 20% equity

✅ Your credit is strong

✅ You compare real lender offers

✅ You upload your Loan Estimate to Fincast to verify you're getting the best pricing

Pro Tips (Save These!)

💡 Refinance to remove lifetime MIP

📈 Aim for 80% LTV to drop PMI entirely

📊 Compare FHA vs. conventional rates before deciding

⚠ Don’t refinance if your new rate is too high

🚀 Use Fincast to benchmark your refinance offer

Action Checklist

• Calculate your home’s current value

• Check your equity and LTV

• Review your credit score

• Request a Loan Estimate

• Upload your Loan Estimate to Fincast

• Compare offers and choose the best one

• Close and remove your FHA MIP forever

👉 Ready to eliminate FHA mortgage insurance?

Upload your Loan Estimate to Fincast — and let vetted lenders compete to give you the best conventional refinance deal.

This article provides general information and may not reflect your specific financial situation. Always compare lender offers before making a final decision.