FHA Streamline vs Conventional Refi

[Zack Pirulli]

Hey Everyone,

I bought a 2 family rental with and FHA loan about 1.5 years ago. During that time I've completed a significant amount of work to the home (converted attic to extra living space adding about 900 sqft, an added bedroom, added bath, new roof, and various other things). Home values in my area have also increased significantly in recent months. My loan was recently sold to another bank and they have been contacting me about about an FHA Streamline. The guy I spoke to said my rate would lower to about 2.5% saving me around $200/month. I would still carry the PMI which is also about $200/month but I know the FHA Streamline is a fairly quick and cheap process (no income verification, appraisal, etc.). My main question is would I be better off trying to refinance to a conventional loan? I believe with the increase in home values in my area and the work I've completed on the house I would be able to reach the number needed for 20% equity. But I know there is a chance I don't hit the number needed for 20% equity. If I dropped the PMI I would also save about $200/month but closing costs would be much higher and its a more in depth process than the FHA Streamline.

Would I be better off locking in the 2.5% rate, saving $200/ month, the refinancing once I get to 20% equity and drop the PMI and save another $200/month?

I also have to consider the future and when I continue to purchase more properties the higher equity in the property will look better. Any input is much appreciated!

[Harjeet Bhatti]

@Zack Pirulli Because of UFMIP fees and MI I would say go with conventional loan. You don't have to refinance again to take out MI from your loan.