Should You Refinance Your FHA Loan to a Conventional Mortgage?

As mentioned, requirements for FHA loans aren’t as strict as those imposed by conventional mortgage programs.

An FHA loan is an attractive mortgage option that can offer several benefits, especially for first-time buyers. Because these loans are insured by the Federal Housing Administration (FHA) – an agency within the U.S. Department of Housing and Urban Development (HUD) – lenders can offer more favorable terms, including lower down payments and lower credit score and income requirements.

However, FHA loans do have some drawbacks and some of the program’s provisions can be a burden on a homeowner’s budget. That’s why it’s not uncommon for FHA borrowers to refinance into a conventional mortgage when if and when they’re able to.

If you’re a current FHA borrower, how do you know if it’s worth making the switch? The answer depends on many factors, but here are a few considerations.

Your qualifying criteria has improved

As mentioned, requirements for FHA loans aren’t as strict as those imposed by conventional mortgage programs. Currently, the minimum credit score needed to qualify for an FHA loan with a 3.5% down payment is 580. It’s possible to get an FHA loan with a score below that cutoff – as low as 500 – but you’ll need to bump up your down payment to 10%. 

https://www.lansingstatejournal.com/story/marketplace/real-estate/2022/02/17/should-you-refinance-your-fha-loan-conventional-mortgage/6829465001/

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