Still on an FHA Loan? It Might Be Time to Switch and Drop Mortgage Insurance

Refinancing from an FHA loan to a conventional loan could eliminate your mortgage insurance premium and save you money every month.

If you're currently in an FHA loan, you're likely paying a mortgage insurance premium (MIP) every single month — and here's the frustrating part: it may never go away on its own, depending on when your loan originated.

Conventional loans work differently. Once you reach 20% equity in your home, private mortgage insurance (PMI) is automatically canceled. For many California homeowners who've seen their home values rise over the past few years, that 20% threshold may already be within reach.

Refinancing from FHA to conventional makes sense when: your credit score has improved (typically 620+ to qualify, and 740+ for the best rates), your home's current value gives you at least 20% equity, and the monthly savings from dropping MIP outweigh the closing costs within a reasonable timeframe — your break-even point.

For example, if refinancing costs you $5,000 in closing costs but saves you $250/month in MIP, you break even in just 20 months. After that, it's pure savings.

Your credit score also plays a big role here — not just in whether you qualify, but in the rate you'll be offered. Even a 20-point score difference can meaningfully impact your monthly payment.

Thinking about making the switch? Reach out to us and we'll help you calculate whether now is the right time to refinance out of your FHA loan.