Refinancing out of an FHA Loan

[Kevin Reinell]

Hey BP,

I am in the middle of finalizing the financing on a duplex, but due to lack of cash must go the FHA route. The problem is that the PMI on the loan is expensive (about $265 per month) and really kills the cash flow for my deal. The duplex needs a rehab and I had planned on using the BRRRR strategy for this one while I house hack and live in one unit while renting the other out. Both units are currently rented, one tenant is month to month. My question is at what point would I be able to refinance out of the FHA loan into a conventional? Can I do it right after I finish the rehab? Is the there a waiting period for FHA? Anyone who has had experience with this that could chime in would be great.

Appreciate your responses!

[Bob Norton]

@Kevin Reinell You don't have to keep an FHA loan for any specific period of time. So, you can refinance out of it at any time. I think the only provision for an FHA loan is that the borrower live in the property for at least a year. There are costs to refinance a loan, plus to get rid of PMI, you will have to borrow less than 80% of the value. If your rehab of the property increases the value to allow you to refi out of the FHA and remove PMI, then this is possible. You may have to wait 6-12 months for seasoning, depending upon your bank.