Refinancing FHA to conventional (PMI, loan, credit score, fees)

[540_804]

How soon after you buy a house (financed with an FHA loan) can you refinance it to move to a conventional loan?

I'm scheduled to close no later than late June on an FHA loan. The reason I went with FHA is because of my work history; it was difficult getting a conventional loan as a recent college grad with a new job and less than 20% down.

Of course, with an FHA loan I have to pay PMI, which I have calculated will cost me well over $10k over the first 5 years of the loan.

At the price that I'm buying, I will already have over 20% "equity" in the house (difference between loan amount and appraise value).

I'd much rather use that $10k to pay off the balance of my student loans and put towards a few projects around the house and save for retirement.

I'm already getting a really good deal on the house, am paying less than I budgeted and even my monthly payments are well below what I expected to pay. But knocking an extra $150 (at the very least) off of my monthly payment would make this deal a slam dunk.

How soon could I refinance and are there other factors that I should consider other than amount of equity in the house?

Thanks in advance for the help. This site has been extremely helpful in the past!

[willow wind]

FHA loans have no prepayment penalty so technically you could refinance any time.

However, you should speak to a couple of lenders to see if you could qualify to refinance into conventional.
In other words, was it just the downpayment that made you need to go FHA. Or is that newness of the job still going to be a factor ?

Also keep in mind, that refinancing is not free. There is still an appraisal to be done, application fees, points, closing costs, etc. It can cost a pretty penny to refi. This is why you need to shop around and see if you can get it done very cheaply. Sometimes you can, sometimes not. Try the lender you are using for your FHA loan first.

Also your original appraisal cannot be used for a new loan. Getting a new appraisal is always rolling the dice. You may think you have 20% equity based on that appraisal, another appraiser may give you a totally different value. Time passes, comparable sales change, etc.

Thus, there is no reason for you hang to hang onto you FHA loan from a pre payment point of view. . So explore your options, talk to lenders and see if you qualify and it if makes sense to refi quickly.

[Modification Specialist]

540"

You sound like you are a very ambitious individual, few college graduates right out of school have the ability to qualify for a mortgage buying a home. I can understand a strong desire to get the best deal. You are going to have wait so it is cost effective to consider refinancing

Good advice what "Willow wind" said by refinancing into another loan.

By looking to refinance, need to figure at least 5% of the loan balance to be attributed for closing costs. That would not be a wise move. What it would cost you in equity could be more than the $10k for first 5 years your paying the PMI.

One smart move in the future, do an in-house (stream-line) refinance. Moving from an FHA to conventional loan, yet staying with the same lender. Doing so your costs will be minimal if anything.

As for the appraisal - they are only valid for 90 days, due to changing comparable homes around your home. You do want to keep it, to compare to any future upgrades, plus something to show what is was worth at that point in time. Other than that, is has served it's purpose.

One of the qualifying factors for a conventional loan (when I was an L.O), you need at least two years of continuous work in the same field.

Piece of advice for your future (since you will be spending less than what you budgeted), send extra as payment towards principle. This will increase your equity faster and shorten's you term (an extra payment per year on a 30yr, knocks of 7.5 years off the loan). Plus you get reported to the credit bureaus as being more responsible, your reward is a high credit score. That way in 3 to 5 years you would be setting yourself up to refinance into loan with very good terms.

Good Luck