The only way to escape FHA insurance.
If you bought with an FHA loan and put down less than 10%, your mortgage insurance never cancels — it runs for the life of the loan. Refinancing into conventional financing is the only exit. In California, appreciation often gets homeowners to the 20% equity they need years before they realize it.
Combining the rate change with eliminating your FHA mortgage insurance entirely.
Why FHA borrowers refinance to conventional
It usually isn't about the rate at all. It's about a monthly charge that has no expiry date.
When you bought with an FHA loan and put down less than 10%, you agreed to mortgage insurance for the life of the loan. It does not cancel at 20% equity. It does not cancel at 50% equity. It runs until the loan is paid off or refinanced.
Conventional loans work differently. Private mortgage insurance cancels — automatically at 78% loan-to-value, or on request once you reach 20% equity. A conventional loan with PMI is a temporary condition; an FHA loan with MIP is a permanent one.
At 0.55% annually, a $375,000 FHA balance carries roughly $172 a month in insurance alone. Over the remaining life of a 30-year loan that's tens of thousands of dollars buying you nothing. Eliminating it is often worth more than any rate improvement you'd chase separately.
Here's the part California homeowners underestimate: you need roughly 20% equity, and appreciation counts toward it — not just principal paydown. Someone who bought with 3.5% down a few years ago may already be well past that threshold through value growth alone, while still paying MIP every month because nothing triggers automatically to stop it.
Slide the calculator above: set both rates the same and you'll see the saving is entirely the mortgage insurance. That's the whole case in one number.
When this is a bad idea
A conventional refinance only makes sense if the new rate doesn't cost you more than the insurance saves.
If you hold an FHA loan from 2020–2022 at a rate in the 3% range, do not do this. You'd reprice your entire balance at today's rates to shed a $150–$250 monthly premium. The rate increase on the full balance will almost certainly cost you far more than the insurance does.
Plenty of lenders will write that refinance and describe it as "getting rid of your mortgage insurance." The arithmetic doesn't support it. If you need equity in that situation, use a HELOC and keep the FHA loan exactly where it is.
| Your FHA rate | Equity | Verdict |
|---|---|---|
| Near or above today's rates | 20%+ | Refinance — you gain on both rate and insurance |
| Near today's rates | Under 20% | Wait for more equity, or price a low-down conventional with cancellable PMI |
| Well below today's (3–4%) | 20%+ | Usually don't — the rate increase outweighs the MIP saving |
| Well below today's | Under 20% | Don't. Keep the loan; use a HELOC if you need funds |
What else a conventional refinance does
Escaping FHA is the headline use, but it isn't the only one.
Lower your rate
Standard conventional-to-conventional refinancing when market rates fall below yours. Because no cash is taken out, this earns the sharpest pricing available on a refinance.
Calculate your break-even before proceeding — closing costs divided by monthly savings.
Shorten your term
Moving from a 30-year to a 20- or 15-year loan cuts lifetime interest substantially and builds equity faster. Shorter terms also carry lower rates.
Worth pricing even if you don't take it — the comparison is informative.
Escape an adjusting ARM
If your adjustable-rate mortgage is nearing its first adjustment, moving to a fixed conventional loan buys certainty. Start months before the reset.
Leave a Non-QM loan
Borrowers who used a bank statement or DSCR program commonly refinance into conventional once their tax returns support agency qualification — often a substantial pricing improvement.
Check your prepayment penalty window first.
Remove a borrower
After a divorce or separation, refinancing into one name removes the other party's liability. This requires full qualifying on the remaining borrower's income alone.
Consolidate a second lien
Rolling a home equity loan or HELOC into your first mortgage simplifies to one payment. Note that lenders may classify this as cash-out depending on when and how the second lien was originated.
If you already have a conventional loan, you may not need to refinance at all
This is worth saying plainly on a page trying to sell you a refinance: if your existing loan is conventional and you're paying PMI, you can often have it cancelled without refinancing.
Conventional PMI terminates automatically once your balance reaches 78% of the original property value on the amortization schedule. But you can request cancellation earlier — at 20% equity — and that request counts appreciation, not just principal paid down.
In California, where values have risen substantially in many markets, homeowners routinely cross 20% equity years before the automatic date. Most never ask. The process is typically a written request to your servicer plus a current appraisal or broker price opinion — a few hundred dollars, against thousands in refinance closing costs to accomplish the same result.
Call your servicer before you call a lender. Ask what's required to cancel PMI on your loan. If the answer solves your problem, you've saved yourself a refinance. If it doesn't — because you have an FHA loan, or because you also want a better rate or term — then a refinance is genuinely the right move.
A broker who tells you this before quoting you is worth more than one who doesn't.
Conventional refinance requirements
Unlike a streamline program, this is a fully underwritten loan — appraisal, income documentation, and credit review all apply.
The step that trips people up: the appraisal. Escaping FHA insurance generally requires 20% equity, and that's confirmed by appraised value. A value that comes in lower than expected can end the file. Worth a realistic conversation first.
- Credit of 620 minimum, with pricing improving at each tier and the best terms at 740 and above. Conventional pricing is more credit-sensitive than FHA, so the gap between tiers matters.
- Equity — 20% is the target if your goal is eliminating mortgage insurance. You can refinance with less, but you'd carry conventional PMI instead, which at least cancels later.
- Income and DTI — two years documented, debt-to-income generally to about 45% with automated underwriting sometimes reaching 50%. Self-employed borrowers should ask about alternative documentation.
- Appraisal — required, and it determines whether you clear the equity threshold. Appraisal waivers are occasionally available on very strong files; worth asking about.
- Clean payment history — recent mortgage lates are the most damaging single item on a refinance file, more so than a moderate credit score.
- Conforming limits — staying under your county's limit ($832,750 baseline, up to $1,249,125 high-cost) keeps you in the best pricing tier. Above it, see jumbo.
How it closes
Three to five weeks, with the appraisal usually setting the pace.
Check whether you need to refinance
If you have a conventional loan and want PMI gone, we check whether your servicer will simply cancel it. That costs a few hundred dollars instead of thousands. If you have an FHA loan, refinancing is the only route and we move on.
Run the honest comparison
Your current rate against today's, plus the mortgage insurance saving. If you hold a 3% FHA loan, the numbers usually say don't — and I'll show you why rather than writing it anyway.
Estimate your equity realistically
Before ordering an appraisal, we assess whether you're likely to clear 20%. Paying for an appraisal that comes in short is an avoidable expense.
Lender comparison
Rate, PMI cost if applicable, and lender fees compared together across 50+ wholesale lenders — a lower rate with higher fees frequently loses.
Application, appraisal, underwriting
Full documentation, appraisal ordered, conditions coordinated so you're not chasing paperwork.
Close, plus three days
Sign, then the federal three-business-day rescission window on a primary residence before the loan funds.
I'll tell you when to call your servicer instead.
I'm Jonathan Boukarim, an independent licensed mortgage broker based in San Diego. "Refinance to get rid of your mortgage insurance" is a genuinely good pitch — and it's wrong for a lot of the people it gets pitched to.
When you call (619) 436-5578, I'll first check whether you can simply request PMI cancellation from your current servicer, which costs a fraction of a refinance. If you have an FHA loan, I'll run the honest comparison including your current rate — because if you're holding a 3% loan, refinancing to escape a $172 premium usually loses money, and you should hear that.
Other California refinance and loan programs
California Conventional Refinance FAQs
Is refinancing to conventional the only way to remove FHA mortgage insurance?+
If you put down less than 10% originally, yes. FHA's annual mortgage insurance premium runs for the life of the loan in that case — it does not cancel at 20% equity, or at any equity level. An FHA Streamline refinances FHA into FHA, so the insurance carries forward. Only moving to conventional financing eliminates it.
If you put down 10% or more, FHA MIP drops off after 11 years without refinancing.
How much equity do I need?+
Around 20% if your goal is a conventional loan with no mortgage insurance at all. You can refinance with less, but you'd carry conventional PMI instead — which is still an improvement over FHA, since conventional PMI cancels once you reach 20% equity.
Importantly, appreciation counts toward your equity, not just principal paydown. Many California homeowners are further along than they assume.
Should I refinance out of FHA if I have a 3% rate?+
Almost certainly not. You'd reprice your entire balance at today's rates to eliminate a premium of perhaps $150–$250 a month. The rate increase applied to the full loan will typically cost far more than the insurance does.
Keep the FHA loan. If you need funds, a HELOC leaves it untouched entirely.
Can I cancel PMI without refinancing?+
On a conventional loan, yes — and you should check this before considering a refinance. PMI terminates automatically at 78% loan-to-value on the amortization schedule, and you can request cancellation earlier at 20% equity, with appreciation counting toward it.
The process is typically a written request plus a current valuation — a few hundred dollars against thousands in refinance closing costs. On an FHA loan below 10% down, this option doesn't exist.
What credit score do I need for a conventional refinance?+
620 is the general minimum, with pricing improving at defined tiers and the best terms at 740 and above. Conventional pricing is notably more credit-sensitive than FHA, so being a few points below a threshold can cost meaningfully. If you're close to a break, ask what it would take to cross it before locking.
How much does a conventional refinance cost?+
Typically 2% to 5% of the loan amount — lender fees, title, escrow, appraisal, and prepaid items. On large California balances that's real money, and it sets your break-even point. Costs can often be rolled into the loan or offset with a lender credit in exchange for a slightly higher rate.
Will refinancing reset my loan term?+
It will if you take a new 30-year term. If you're several years into your current loan, that stretches the remaining balance across 30 years again — your payment drops partly because of the longer term rather than the better rate, and lifetime interest can rise.
Ask to see 20- and 25-year options alongside the 30. They frequently capture most of the benefit without restarting the clock.
Can I take cash out with a conventional refinance?+
Yes, but that's a different product with different terms — see cash-out refinance. It's capped around 80% loan-to-value, prices modestly higher, and requires stronger credit. A rate-and-term conventional refinance with no cash out earns better pricing and easier qualifying.
How long does it take?+
Typically three to five weeks, driven by appraisal turnaround and documentation completeness. On a primary residence, add three business days after signing for the federal rescission period before the loan funds.
Can I refinance from a Non-QM loan into conventional?+
Yes, and many borrowers plan for exactly that from the start. Once your tax returns show income meeting agency guidelines — typically after two years of stronger reported income — conventional pricing is usually a substantial improvement over Non-QM. Check your prepayment penalty window first, since refinancing inside it can erase the benefit.
Does refinancing trigger a property tax reassessment in California?+
No. Under Proposition 13, your assessed value and tax basis follow acquisition rather than refinancing. Replacing your mortgage leaves your property tax bill unchanged. Only new construction — an addition or ADU — adds assessed value, and only for the improvement itself.
Find out what dropping FHA insurance is worth
Send me your balance, estimated value, and current rate. I'll show you the real monthly change including eliminated mortgage insurance — and tell you plainly if the numbers say keep your current loan.
Jonathan Boukarim · Licensed California Mortgage Broker · NMLS 1892952 · (619) 436-5578Get Your Conventional Refinance Quote
Real numbers on rate, mortgage insurance, and total cost.