Conventional Refinance

As a homeowner, you know the value of making your home as affordable as possible. Once you own the home, you have the option to refinance it, making it possible to replace your current mortgage loan with a new one. By refinancing with a conventional loan, you can lower mortgage payments, pay off the loan more quickly or gain access to cash for paying down high interest debt or dealing with other expenses.

Regardless of whether the original mortgage was conventional, FHA or VA, you may qualify for a conventional refinance. The qualification process for refinancing is similar to buying: You must meet the standards set for borrowers by two enterprises sponsored by the federal government, Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation). Meeting those standards opens up the possibility of flexible options for refinancing.

Let’s Get Your Loan Started

What is a Conventional Refinance Loan?

There are two types of conventional refinance loans: a rate and term refinance and a cash-out refinance.

  1. Rate and term refinance
  2. Cash-out refinance

Rate and term refinance

Rate and term refinances allow you to . . .

  • Lower your monthly mortgage payment by lowering your interest rate
  • Help you pay down your mortgage faster
  • Eliminate the cost of mortgage insurance  (PMI) if you have 20% equity in your home when you refinance

Cash-out refinance

Cash-out refinances enable you to . . .

  • Access cash from the equity you’ve built in your home
  • Replace your current mortgage with a new larger mortgage (totaling more than what you currently owe)
  • Receive cash which you can use for other expenses (such as other debts that have a higher interest rate or other needs such as home renovations or college tuition)
  • Borrow up to 80% of the home’s value

How to Get a Conventional Refinance Loan

To learn whether a conventional loan is the best option for refinancing your home, connect with us! To get you started, we’ve outlined the steps and documentation needed to better acquaint you with what’s involved.

The Refinancing Process

Contact us! We’ll help you assess whether you’ll benefit from refinancing your current mortgage.

For a conventional refinance, we will consider . . . 

  • Your current interest rate
  • Your credit score
  • Your home’s current market value (via a professional appraisal)
  • Your equity in the home

For either a rate and term refinance or a cash-out refinance, we will. . .

  • Explain your options to see what provides you with the most benefit
  • Discuss potential terms for which you qualify
  • Guide you through each step until we close on your new refinance loan

Conventional Refinance Requirements

  • Here are the common requirements to qualify for a conventional refinance. If you have questions about these requirements, we’re here to help!
    • Credit score of 620 or higher. (A higher credit score often results in a better interest rate.)
    • Debt-to-income ratio (DTI) at or below 50%. (DTI shows the percentage of income which pays for debt.)
    • Employment verification and history
    • Loan-to-value ratio (LTV) of 80% or less, meaning that you have 20% equity in the home. (If you currently have PMI, a refinance may enable its termination.)

Conventional Refinance FAQs

Your home is a major investment. It’s ok to have questions about refinancing it. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.

In most cases, if your name is on the title and you’ve paid on your current mortgage for at least six months, you’ll be able to refinance with a conventional loan.

This is common for borrowers with current conventional or VA loans. Homeowners who currently have an FHA loan may need to wait up to a year to do a conventional cash-out refinance.

This depends on the type of refinance and the benefits you’re looking for. It’s best to have at least 20% equity in your home for a rate and term refinance because that equity allows you to eliminate paying Private Mortgage Insurance (PMI). (A minimum of 20% equity is often required for a cash-out refinance.)

If you have less than 20% equity but have good credit, you may still benefit from refinancing. However, you may need to continue paying PMI; and your interest rate may not be as low.

A conventional refinance goes through many of the same steps required to close a conventional purchase loan. As was the case when you purchased your home, you will need another appraisal for a conventional refinance to establish the current value of the house.

Once the value is determined, we can finalize the details of your loan to determine the reduction in your monthly payments with a rate and term refinance or how much cash you can borrow with a cash-out refinance.

A conventional refinance can replace various types of purchase loans, including FHA or VA loans. A conventional refi also provides broader options for rate and term refinances or cash-out refinances. However, it also requires more documentation, more time and a higher credit score for approval.

The FHA Streamline refinance is only available to homeowners who currently have an FHA loan. The same is true for the IRRRL of the VA, available only to those with a VA loan. The application process for these mortgages is abbreviated and less complicated than a conventional refinance, but there are fewer options.

As is the case with a conventional loan to purchase a home, there are both upfront costs as well as those included in your ongoing monthly payment. We will detail all of these expenditures to you as the loan is processed, and we’ll fully disclose the final sum prior to closing.

Generally, closing costs range from 2-4% of the total loan amount.

Let’s Get Your Loan Started

  • Most common refinance loan
  • Flexible term options
  • Lower the interest rate
  • Pay off the mortgage more quickly
  • Use equity to borrow cash
  • Rates are lower if credit is higher
  • Eliminate mortgage insurance with 20% equity