Property Manager · Denver CO · Member since 2020 · 37 posts · 29 votes
Hello this question may have been asked before and may be obvious but why do most people refinance from a fha loan to a conventional? When I get my first property I’m going to be doing a 3.5% fha loan with down payment assistance but just confused on how the whole refinancing works. Thank you!!
Rental Property Investor · Springfield, MO · Member since 2020 · 120 posts · 96 votes
6y
People like to refinance to a conventional because it makes for a lower overall monthly payment, wiping away your FHA mortgage insurance. In addition, you can only have 1 FHA loan at a time, so if people want to continue to take advantage of the FHA program, they must refinance out first.
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y
@Taylor Thompson there are a few reasons. The first would be to get rid of the PMI that is associated with FHA loans for the life of the loan. A lot of the deals I sell here in the Chicago area are in the 300-500k range, so PMI can be $200-400 per month. Just by getting rid of PMI you can up your cash flow a lot!
The other reason would be to get the use of the FHA loan back to buy another primary residence. This can be a great strategy for those who want to house hack as you are able to use the FHA to buy another primary with 3.5% down.