A conventional refinance is the loan of choice for many homeowners in today’s market. While HARP and FHA have dominated the refinance market in years past, the standard conventional refinance is becoming the go-to option now that home equity is returning across the nation.
With a conventional refinance, homeowners can:
Refinance shoppers often ask whether there is a conventional streamline refinance similar to an FHA streamline loan that does not require an appraisal or income verification. Many homeowners who have a conventional loan now want to refinance that requires less paperwork.
While there is not an official conventional streamline program, the HARP refinance came close, but this program is now expired. Most homeowners did not need an appraisal to use this loan.
However, documentation requirements are often lower with standard refinances, mainly due to computerized approval systems. Most refinance applicants will only need to supply pay stubs, a W2, and a bank statement if any cash is required to close the loan. Additionally, Fannie Mae and Freddie Mac often waive appraisal requirements for standard refinances. The modern refinance process is extremely streamlined compared to just a few years ago.
The standard conventional loan limit is $510,400. A qualifying refinance applicant can open a loan for at least this amount anywhere in the country.
But Fannie and Freddie allow higher limits in some areas. For instance, San Diego, California has a conventional loan limit of $765,600. Refinance consumers in Seattle, Washington and Queens, New York can also be approved for a higher conventional loan.
The highest limit in the country is available in Honolulu, Hawaii, which is even higher than the limit in San Diego.
Homeowners in areas with high housing costs should check their conventional loan limit before they assume they need a jumbo loan.
Homeowners who refinance multi-unit homes have access to higher loan limits:
Homeowners with multi-unit homes that are also in high-cost areas can receive conventional loans over $1.2 million.
Keep in mind that these are loan limits, not home price limits. Someone refinancing a $2 million home could receive a conventional loan of $510,400 in any area of the country.
Yes. Conventional refinances are available in an adjustable rate mortgage (ARM), fixed for the first three, five, seven, or ten years. During the initial fixed period, the rate is extremely low. ARMs are great for homeowners who plan to move, refinance, or pay off their mortgage in a few years.
Do I have to have a conventional loan now to do a conventional refinance? No. You can refinance any type of loan with a conventional loan. With as little as 5% equity you can refinance
My appraisal shows a lower value than expected. Can I still refinance with a conventional loan? Possibly, but the refinance may require mortgage insurance. Even with that cost, it still might be worth refinancing.
I’m not sure about my credit. Should I apply for an FHA loan first? You don’t have to pick one program when applying for the loan. The lender will look at your entire situation and try for the lowest cost option. If a conventional loan doesn’t work out, the lender will switch you to an FHA loan. Don’t automatically rule out a conventional loan just because of your credit standing.
Why get a conventional loan? Why not refinance with FHA? FHA can be used to refinance, but it’s typically for homeowners who can’t qualify for conventional due to past credit issues. Because if its flexibility, an FHA refinance is more expensive. Most homeowners who can qualify should opt for a conventional refinance.
How do I apply for a conventional refinance? Applying for a conventional refinance is just like applying for any other refinance. Start by checking rates here. The lender will guide you through the rest of the process.