Question by Dom: Is it possible to refinance FHA to conventional if house value has decreased a bit?
I have a FHA loan on a house we bought for $ 173,000 paying a 5.25% rate. Now rates are even lower so I would like to refinance by 3 year old FHA mortgage. My tax assessment on the property says the house is worth $ 160,000 and I have a principal balance of $ 164,730.
I would rather have a Conventional Mortgage and eliminate the impound accounts. Do I have to have 20% of equity built to get a conventional loan?
Answer by Art Vandelay
The tax appraised value is probably a little below a real estate sale appraisal amount, but close enough for some hypotheticals. The tax appraisal is probably about 85-90% of the market value, though this is just a general guess as each district appraises slightly differently).
If the house is only worth 160,000, you could get a conventional loan of 128,000 (80% of value). This would require you to come up with 36,730 down payment (to pay off the negative equity on the old loan and the 20% down on the new).
Also, if you want to waive the impounds/escrows, you will pay an additional fee for that feature as these are problematic for lenders (people are late paying the insurance or property taxes, notices have to go out, etc. Just a real P.I.T.A. for lenders).
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