Mortgage  Question?
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FHA Streamline or Conventional Refinance?

I am looking to refinance my FHA loan. My credit score has improved and I have significant equity in my home now. Should I use an FHA Streamline Refinance or conventional mortgage?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

You are thinking about refinancing the right way  You have a strong credit score and significant equity in your home which means your loan-to-value (LTV) ratio is relatively low based on the information you provided.

These positive factors mean that you should be able to qualify for a conventional mortgage while the FHA Streamline Refinance also remains a financing option for you. Most borrowers select conventional mortgages because you are not required to pay the up-front and ongoing monthly FHA mortgage insurance premium (MIP). Based on the information you provided your up-front FHA MIP would be 1.75% of your loan amount and your ongoing monthly FHA MIP would be 0.45% of your loan amount.

The positive of an FHA mortgage is that in some cases the mortgage rate is lower than for a conventional mortgage but when you factor in the MIP a conventional mortgage is almost always the preferred option. You can review our overview of the Pros and Cons of an FHA Streamline Refinance to understand the positive and negatives of the program.

My recommendation is that you contact at least four lenders and ask for mortgage quotes for both a conventional loan and an FHA Streamline Refinance. You can review conventional and FHA lenders in your area by clicking INTEREST RATES We advise you to contact at least four lenders because mortgage terms vary and shopping lenders is the best way to save money on your mortgage. 

After you contact the lenders you can compare the mortgage quotes to determine the lender and financing option that is best for you. You can also input the loan terms, including the mortgage rate and closing costs, into our Mortgage Comparison Calculator to more easily evaluate the proposals. You can evaluate the quotes to determine if a conventional mortgage or FHA Streamline Refinance makes more sense for you based on closing costs, mortgage rate as well as your ongoing monthly payments (including MIP for an FHA loan). I am relatively confident that comparing quotes will confirm that a conventional mortgage saves you money on both closing costs and your monthly payment.

One point to keep in mind is that there is typically no inherent advantage to refinancing with your current lender. You can obtain a mortgage quote from your current lender but definitely compare it to other lenders and select the proposal with the best loan terms.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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