I often have past clients who purchased their home in Phoenix with an FHA loan ask me about the current estimated value of their home because they are considering refinancing an FHA loan into a conventional loan. Why should you also look into this? To save money every month!
Homeowners who purchased a house using an FHA loan most likely put 3.5% of the purchase price as a down payment. In order to make the lender comfortable with a reduced down payment, this buyer was required to carry mortgage insurance for the life of the FHA loan. How much does mortgage insurance cost? It’s calculated as a function of the size of the loan and the borrower’s credit score (FICO) but typically runs about $200 per month for an FHA loan of $275,000 with a FICO of 700. The monthly mortgage insurance premium declines as the loan balance is paid down, but still amounts to $30,000 for the life of the FHA mortgage in this example!
To qualify for a conventional loan, borrowers must put down 20% of the purchase price of the home. If they go the FHA route of 3.5% down, they will need to contact their lender when they believe they have now built up 20% or more equity in the home. How do you build 20% or more equity? By either paying down the loan balance so the loan to value ratio is less than 80% (it started out at 96.5% in FHA scenario) and/or by having the home value increase. With Phoenix home values up substantially in recent years, if you purchased your home with an FHA loan, odds are you are in a great situation to refinance out of your FHA loan into a conventional loan.
I urge you to contact your lender to inquire about making this change to save thousands of dollars. If you are unsure of your home’s current value to assist in determining if your loan to value ratio is below 80%, request your no-cost and no-obligation Phoenix home value estimate from me. I do not need to visit your home and you will receive your report from me within 24 hours to present to your lender to see if you qualify for an FHA refinance.
