How to refinance an FHA loan to a conventional loan

You can refinance an FHA loan to a conventional loan at any time, as long as you meet the lender's qualification requirements. The primary reason homeowners make this move is to eliminate FHA mortgage insurance premiums. For most FHA borrowers who put down less than 10%, MIP lasts the life of the loan. Conventional loans use private mortgage insurance instead, but PMI cancels automatically once you reach 20% equity — FHA MIP does not.

To qualify, you'll generally need a credit score of at least 620, a debt-to-income ratio of 45–50% or lower, and sufficient home equity. If you have 20% equity at the time of the refinance, you can avoid PMI on the new conventional loan entirely.

Before refinancing, calculate your break-even point: divide your closing costs by your expected monthly savings. If you plan to stay in the home past that date, the refinance likely makes financial sense.

Why homeowners refinance FHA to conventional

The main driver is mortgage insurance. FHA loans require two types: an upfront mortgage insurance premium paid at closing, and an annual MIP paid monthly. For borrowers who put down less than 10%, that annual MIP continues for the entire life of the loan — it never goes away, no matter how much equity you build.

Conventional loans handle mortgage insurance differently. Private mortgage insurance on a conventional loan is required only when your loan-to-value ratio is above 80%. Once you hit 20% equity based on your home's original value, you can request PMI cancellation. Under federal law, it terminates automatically when your LTV reaches 78%. That difference — lifetime MIP versus cancellable PMI — is the core financial case for making the switch.

The second reason is rate. If your credit score has improved since you took out the FHA loan, or if market rates have dropped, a conventional refinance may get you a meaningfully lower interest rate. Better's fully online process makes it easy to check current rates and compare your options in minutes.

A third reason: some homeowners want to tap equity through a cash-out refinance. In many cases, a conventional cash-out refinance is the cleaner path, since it avoids the upfront MIP you'd pay if you refinanced into another FHA loan.

Do you qualify? The three requirements

Credit score

The minimum credit score for a rate-and-term conventional refinance is generally 620. For cash-out refinances, many lenders look for a score in the mid-600s or higher. It's worth noting that as of November 2025, Fannie Mae and Freddie Mac shifted away from requiring a specific minimum score — instead evaluating borrowers on a holistic assessment of overall credit risk. In practice, a 620 remains the practical floor at most lenders, but a stronger score improves your rate and terms.

If your credit score has increased significantly since you took out the FHA loan, this refinance may make more sense now than it would have when you originally bought. You can learn more about what credit score you need to refinance and what factors affect it.

Debt-to-income ratio

Most lenders require a DTI of 45–50% or lower for a conventional refinance. Your DTI is your total monthly debt payments — including the new mortgage payment — divided by your gross monthly income. If your income has grown since you took out the FHA loan, your DTI may now be significantly lower, which improves both your eligibility and the terms you'll qualify for.

Home equity and LTV

Your loan-to-value ratio — your outstanding mortgage balance divided by your home's current appraised value — determines whether you'll need PMI on the new conventional loan. The key thresholds:

• 20% equity or more (80% LTV or below): You qualify for the conventional refinance and avoid PMI entirely.
• Less than 20% equity: You can still refinance, but you'll pay PMI until you reach 80% LTV. This still makes sense if eliminating FHA MIP saves you more than you'd pay in PMI — but the math needs to be checked.

A new appraisal is required for a conventional refinance. The appraised value will determine your LTV and whether PMI applies.

How to estimate your equity

Divide your current loan balance by an estimate of your home's current market value. If your balance is $240,000 and your home is worth approximately $310,000, your LTV is roughly 77% — meaning you have about 23% equity and would avoid PMI on a conventional refinance.

Rate-and-term vs. cash-out refinance

There are two types of conventional refinances to consider, and they have meaningfully different requirements.

A rate-and-term refinance replaces your existing loan with a new one at a different rate, term, or both. No cash is taken out at closing. This is the most common path for FHA-to-conventional refinances — it's straightforward, has no waiting period, and is the fastest route to eliminating MIP.

A cash-out refinance lets you borrow against your equity by taking out a new loan larger than your current balance and receiving the difference in cash. For FHA-to-conventional cash-out refinances, most lenders require that you've had your FHA loan for at least 12 months. LTV is typically capped at 80% for primary residences. If you're considering a cash-out refinance, you can learn more about the types of refinance options available.

For most homeowners looking to escape lifetime MIP, the rate-and-term path is the right one.

Does the math work? How to calculate your break-even

Refinancing has upfront costs — typically 2–6% of the loan amount in closing costs. The question is whether your monthly savings justify those costs given how long you plan to stay in the home.

The break-even calculation is straightforward: divide your total closing costs by your expected monthly savings after the refinance. The result is the number of months it takes to recover your upfront costs.

Example is for illustrative purposes only. Rates, payments, and total interest will vary based on credit profile, loan terms, and market conditions.

For example: if your closing costs are $6,000 and your monthly savings — from eliminating MIP and a lower interest rate — add up to $200 per month, your break-even is 30 months. If you plan to stay in the home for at least 30 months, the refinance pays off. If you expect to sell sooner, it may not.

The monthly savings figure should account for both MIP elimination and any change in your interest rate. If your new conventional rate is actually higher than your current FHA rate — possible if rates have risen since you originated — the MIP savings need to be large enough to overcome the rate difference.

Understanding when to refinance your mortgage depends entirely on this break-even math. A refinance that looks attractive on the surface can be the wrong move if you're three years away from selling.

How the refinance process works, step by step

Refinancing an FHA loan to a conventional loan follows the same general process as any mortgage refinance.

Step 1: Check your credit and equity. Pull your credit report and estimate your current LTV before you apply. This gives you a realistic picture of what you'll qualify for and whether MIP elimination is achievable.

Step 2: Compare lenders and rates. Shopping for a mortgage across multiple lenders is the single most effective way to reduce your rate. Even a small rate difference compounds significantly over a 30-year term.

Step 3: Apply and submit documentation. A conventional refinance requires full income verification — pay stubs, W-2s, tax returns, and bank statements. Unlike an FHA streamline refinance, which allows reduced documentation, a conventional refinance requires complete underwriting.

Step 4: Appraisal. A licensed appraiser will assess your home's current market value. This confirms your LTV and determines whether PMI applies on the new loan.

Step 5: Underwriting. Your lender reviews your full financial picture — credit, income, assets, and property — before issuing a loan decision. This typically takes one to two weeks.

Step 6: Close. You'll review and sign final loan documents and pay closing costs. Your new conventional loan replaces the FHA loan, and your MIP obligation ends.

The full process typically takes 30–60 days. You can learn more about how long it takes to refinance and what affects the timeline.

When it might not make sense

Refinancing from FHA to conventional isn't the right move in every situation. Be honest with yourself about these scenarios before you proceed.

You don't have enough equity to eliminate MIP. If your LTV is still above 80%, you'll exchange FHA MIP for conventional PMI. That's not necessarily a bad trade — PMI is cancellable and MIP is not — but the monthly savings will be smaller, which extends your break-even timeline. Run the numbers carefully.

Your credit hasn't improved enough to get a better rate. If your credit score is at the minimum threshold, you may not qualify for a rate low enough to justify closing costs. A higher rate on a conventional loan paired with PMI could actually cost you more per month than your current FHA loan with MIP.

You're planning to sell in the near term. Closing costs on a refinance are real money. If you sell before you hit your break-even point, you'll have spent more than you saved. Consider how long you realistically plan to stay.

You're close to MIP falling off. If you put down 10% or more on your FHA loan, your MIP is scheduled to end after 11 years. If you're two years away from that point, the case for refinancing weakens significantly.

It's also worth knowing that if refinancing hurts your credit score is a concern, the impact is typically small and temporary — a hard inquiry and a new account lower your average account age. Most borrowers see their scores recover within a few months.

Frequently asked questions

Can I refinance my FHA loan to a conventional loan?

Yes. You can refinance an FHA loan to a conventional loan at any time, as long as you meet the qualification requirements. There is no mandatory waiting period for a rate-and-term refinance. For a cash-out refinance, most lenders require at least 12 months on the FHA loan.

When does it make sense to refinance from FHA to conventional?

It makes the most sense when you have enough equity to eliminate PMI on the conventional loan (20% or more), your credit score has improved since you took out the FHA loan, and your break-even timeline — closing costs divided by monthly savings — is shorter than the time you plan to stay in the home.

How much equity do I need to refinance an FHA loan to a conventional loan?

You need at least some equity to qualify, but the key threshold is 20%. At 20% equity, you can avoid PMI on the new conventional loan entirely, which maximizes your monthly savings. If you have less than 20% equity, you'll still pay PMI — though unlike FHA MIP, PMI on a conventional loan is cancellable once you reach 20%.

Will I still have to pay mortgage insurance if I refinance to a conventional loan?

It depends on your equity. If you have 20% or more equity at closing, you won't need PMI. If you have less than 20%, you'll pay PMI — but it cancels automatically at 78% LTV and can be requested at 80%. FHA MIP, by contrast, cannot be cancelled for most borrowers regardless of equity. You can read more about the difference between MIP and PMI.

What credit score do I need to refinance FHA to conventional?

Most lenders require a minimum credit score of 620 for a rate-and-term conventional refinance, and mid-600s or higher for a cash-out refinance. Since November 2025, Fannie Mae and Freddie Mac have moved to a holistic credit risk assessment rather than a hard floor, but 620 remains the practical minimum at most lenders.

How long does it take to refinance an FHA loan to a conventional loan?

The process typically takes 30–60 days from application to closing. The appraisal, income verification, and underwriting review are the main time factors. Having your documents ready upfront — pay stubs, W-2s, tax returns, and bank statements — speeds things up significantly.

What are the closing costs for refinancing FHA to conventional?

Closing costs for a conventional refinance typically range from 2–6% of the loan amount. These include appraisal fees, title and escrow fees, origination fees, and prepaid items. Some lenders allow you to roll closing costs into the new loan, though that increases your balance and reduces the net benefit of the refinance.

Is an FHA streamline refinance better than switching to a conventional loan?

It depends on your goal. An FHA streamline refinance is faster and requires less documentation — but it keeps you in the FHA program, which means you continue paying MIP. If your goal is to lower your rate with minimal friction, a streamline may make sense. If your goal is to eliminate lifetime mortgage insurance, a conventional refinance is the only path. You can learn more about how the FHA streamline refinance works to compare.

The bottom line

Refinancing an FHA loan to a conventional loan is one of the most financially meaningful moves available to homeowners who have built equity and improved their credit since they bought. The ability to eliminate lifetime MIP — and eventually shed PMI entirely — can reduce your monthly payment by hundreds of dollars and save tens of thousands over the life of the loan.

The math needs to work. Run the break-even calculation, be honest about your timeline, and make sure the rate and equity picture support the move. If they do, the case is usually strong.

Better's fully online process lets you check your rate and review full loan terms without committing to anything. If a conventional refinance makes sense for your situation, you'll see it clearly before you proceed.