A conventional refinance replaces your current mortgage with a new loan that is not insured or guaranteed by any government agency. No FHA mortgage insurance premium, no VA funding fee, no USDA guarantee fee, and no rules about who is allowed to apply. The loan follows the standards set by Fannie Mae and Freddie Mac, the two government sponsored enterprises that buy most American mortgages, which is why you will hear these called conforming loans.
I am Garrett Puckett, Founder and CEO of Security America Mortgage. We built our reputation on VA lending, but a meaningful share of the refinances we close every year are conventional, and plenty of those are for veterans. That surprises people until they see the math. The right refinance is whichever one costs the least for the job you need done, and sometimes that answer is conventional even when a government option sits on the table.
This guide answers every question we get on refinance calls: who qualifies, how much equity you need, how to kill mortgage insurance for good, how the cash-out rules work,
Every conventional refinance is doing one of three jobs. Knowing which one you need tells you which rules apply — and whether a government alternative might be cheaper for your specific situation.
The rate and term refinance. New loan at a better rate, shorter payoff, or a switch from adjustable to fixed. You do not need a mountain of equity — up to 97% LTV is available in some programs, with PMI applying above 80%.
The workhorse job. FHA borrowers refinance into conventional specifically to end mortgage insurance that would otherwise never stop. At or below 80% LTV, PMI disappears entirely. See our FHA vs VA comparison for routing guidance.
Up to 80% of appraised value, with everything above your payoff and costs coming to you at closing. Debt consolidation, renovations, another property down payment — no restrictions on use once funds are in your account.
Conventional pricing is more credit-sensitive than government programs because of the loan level price adjustments Fannie Mae and Freddie Mac apply based on score and LTV. This is why strong credit borrowers usually find their best deal in conventional — and why borrowers in the low 600s often price better in a government program. Use our mortgage calculators to run your specific scenario.
Most articles give you the summary. Here are the complete rules, because they trip people up constantly.
For FHA loans closed from June 2013 onward with less than 10% down: annual MIP runs for the life of the loan. It never cancels regardless of how much equity you build. With 10%+ down, it runs 11 years.
The only exit before those points: refinance out of FHA entirely into a conventional loan. When you refinance at or below 80% LTV, mortgage insurance disappears in one move. An FHA buyer from 2020 or 2021 who put 3.5% down is very often under 80% LTV today without having thought about it.
See our FHA vs VA loan guide if you are also eligible for VA financing — that comparison changes the routing for many veterans.
You may not need to refinance at all. You can request PMI cancellation at 80% LTV based on the original value, and the servicer must cancel automatically at 78%.
If your home's value has risen substantially, most servicers also cancel based on a new appraisal once you meet their seasoning and LTV rules. A $600 appraisal beats a full refinance for that job.
Refinancing to remove conventional PMI only makes sense when you are also meaningfully improving the rate. We tell you this on the phone before quoting anything — a refinance that costs $6,000 to save $80/month in PMI often has an 8-year break-even that a simple cancellation request avoids entirely.
Veteran routing: If you have a conventional loan with PMI and more than 80% LTV, a VA loan refinance removes mortgage insurance at any LTV, with no PMI ever. The VA funding fee applies unless you are exempt (10%+ service-connected disability, Purple Heart). Run both scenarios. Above 80% LTV the VA move usually wins; below 80% conventional often prices better for strong-credit borrowers.
Cards at 22–28% replaced by mortgage debt at a fraction. A family carrying $35,000 in cards at 24% pays $8,400/year in interest alone. Monthly cash flow relief is often $700+. The discipline requirement is real: unsecured debt is now secured by your home.
Kitchen, roof, addition, pool. Interest on the portion used to substantially improve the home is generally tax deductible — unlike cash used for consumer spending. Keep records, confirm with your tax professional.
Cash-out proceeds routinely fund down payments on rentals and second homes. Once the money is in your account, no rule restricts its use. Conventional is the only path for investment property cash-out — FHA and VA cash-out are limited to primary residences.
Veterans sometimes cash-out to a conventional loan to free their VA entitlement for the next home. Convert the current home to a conventionally financed rental, take full VA entitlement — $0 down — to the next primary residence. This move most articles miss entirely.
Staying 5+ years? Clear yes. Possibly selling in 2 years? Clear no — regardless of how good the rate feels. Also consider: if the new loan resets your term, you may pay less monthly but more over the life of the loan. 12 years into a 30-year loan, refinancing into a 15 or 20-year term often beats a fresh 30, keeping your payoff date while still cutting the rate. Use our mortgage calculators to model both scenarios before you call.
No-closing-cost refinances: The costs never disappear. They are paid through a higher rate as a lender credit, or rolled into the balance. That trade can genuinely make sense when you expect to move or refinance again within a few years — it is a structure choice, not a discount, and any lender presenting it as free is telling you something about themselves.
| Factor | Conventional | FHA Streamline | VA IRRRL / VA Cash-Out |
|---|---|---|---|
| Who can use it | Anyone who qualifies | Current FHA borrowers | Veterans and eligible service members |
| Mortgage insurance | None at or below 80% LTV | Upfront + annual MIP, usually life of loan | None, ever |
| Upfront gov fee | None | 1.75% upfront MIP | 0.5–3.3% funding fee (waived for disabled vets) |
| Cash-out max LTV | 80% | 80% | Up to 100% VA rule; 80% in Texas |
| Credit sensitivity | High — pricing grid applies | Low | Low to moderate |
| Investment property refi | Yes | No | No |
In Texas, the VA cash-out refinance is capped at 80% LTV by the Texas Constitution — identical to the conventional limit. With the same ceiling in both programs, the deciding factor for most Texas veterans becomes the cost. Conventional carries no upfront government fee. The VA cash-out charges a funding fee of 2.15% (first use) or 3.3% (subsequent use) of the loan amount.
On a $320,000 new loan that works out to $6,880 to $10,560 more in upfront cost — for the same cash out, at the same LTV cap. For most non-exempt Texas veterans, conventional is the better cash-out vehicle.
The exception: If your VA disability rating is 10% or higher, the funding fee is waived. At $0 fee, the VA cash-out and conventional are much closer — and VA wins for borrowers above 80% LTV or with credit that prices better in a government program. See VA loans for disabled veterans for the full picture.
For veterans with 10%+ service-connected disability: the VA funding fee is waived entirely. That removes the biggest cost of staying in the VA program and makes the VA IRRRL the obvious choice for rate reduction in nearly every case. Confirm your disability exemption status before we run numbers in either direction.
Conventional waiting periods are the strictest: 4 years after Chapter 7 discharge, 2 years after Chapter 13, 7 years after foreclosure (reduced with documented extenuating circumstances). Government programs run shorter. Inside those windows, a VA refinance may work years before conventional does.
A refinance paying an ex-spouse for their equity share is a common conventional transaction. In Texas, a properly structured owelty of partition lien in the divorce decree avoids the state's home equity restrictions entirely — including the 80% cap. The decree must contain the owelty language before it is finalized.
Borrowers holding adjustable rate mortgages from 2021–2022 refinance to fixed to end adjustment risk. The math involves rate caps, margins, and how long you will keep the home — we walk through every scenario, not just the current rate.
Conventional cash-out refinances on a Texas homestead fall under Section 50(a)(6) home equity rules regardless of loan type: 80% LTV cap, 12-day mandatory wait, 3-day rescission period, once-per-year limit. Conventional is capped at 80% everywhere anyway, so Texans lose nothing on loan size — but the timing rules are immovable.
Above the 2026 conforming baseline of $832,750, jumbo guidelines apply: typically 700+ credit, lower maximum LTVs, and documented reserves of 6–12 months of payments. We originate jumbo refinances across all 10 states.
Recast: lump sum payment + servicer re-amortizes, costs ~$200, keeps your rate. HELOC: leaves your first mortgage untouched, second lien only on the cash you need. If you locked 2.75% in 2021, replacing that whole loan to get $50,000 is usually a mistake. A cash-out refi wins when your current rate is at or above market.
The program minimum is 620. Pricing improves meaningfully at 680, 740, and 780 — the jump from 739 to 740 can be worth an eighth of a point in rate because of how the Fannie/Freddie pricing grid breaks. If you sit a few points under a tier, 30 days of targeted credit work can pay for itself many times over. Use our mortgage calculators to model how a score improvement changes your payment.
As little as 3 to 5 percent for rate and term, though PMI applies above 80% LTV. Cash-out requires keeping at least 20% equity in the property after the new loan funds.
Yes, and it is the primary way FHA borrowers eliminate life-of-loan mortgage insurance. At or below 80% LTV, mortgage insurance disappears entirely with the conventional refinance. FHA buyers from 2020 or 2021 who put 3.5% down are often at or below 80% LTV today due to appreciation.
Yes. For a rate reduction, the VA IRRRL is usually cheaper — but refinancing to conventional makes sense when you want to free your VA entitlement for another purchase. Convert the current home to a conventionally financed rental, then take full entitlement to the next primary residence.
Rate and term: generally right away for conventional to conventional. Cash-out: typically after 12 months of ownership, with limited exceptions such as inherited property.
No legal limit. Each refinance must clear its own seasoning rules and should clear its own break-even math. Serial refinancing that keeps resetting a 30-year clock is how people pay for a house twice.
A hard inquiry and new account cause a small temporary dip — typically a few points for a few months. Multiple mortgage inquiries within a short shopping window count as one under FICO's rate-shopping rule.
Usually, but automated appraisal waivers are common on lower LTV rate and term refinances with strong credit profiles. You will know once the file runs through automated underwriting — if a waiver fires, you save $600 and a week.
Yes. Conventional is the standard path for investment property and second home refinancing. FHA and VA are limited to primary residences. LTV limits and pricing are tighter than primary residence loans.
On a rate and term refinance, yes, within the LTV limit. On a cash-out, costs simply reduce the proceeds. Rolling costs into the balance means financing them for the full loan term — weigh it against paying at closing based on your break-even.
No. Loan proceeds are not income. Interest deductibility depends on how funds are used — home improvements generally qualify, consumer spending generally does not. Keep records and confirm with a tax professional.
Conventional means not government-backed. Conforming means it also fits Fannie Mae and Freddie Mac's size limits and guidelines. Most conventional loans are conforming. A jumbo loan is conventional but not conforming.
Sometimes they are competitive. Often they are counting on you not shopping. Get their quote and at least two others gathered on the same day — a Tuesday quote versus a Friday quote measures the bond market, not the lenders.
Yes. Converting your VA-financed primary residence to a conventional loan frees your VA entitlement. You can then use a VA loan — zero down — on your next primary residence while the former home carries the conventional loan. This is one of the most underused moves in veteran financial planning.
Determine how much home you can afford.
Learn what it costs to fund a VA loan.
Calculate your Basic Housing Allowance.
Find out how much you can borrow for $0 down.
Obtain a construction loan for building or improving a home
Estimate your loan preapproval amount based on your income and expenses.
See if refinancing makes sense for you.
Estimates your monthly VA mortgage payment
