If you’re a homeowner looking to lower your mortgage rate, reduce monthly payments, or access your home equity, a Conventional Refinance Loan could be the right choice. Unlike FHA, VA, or USDA refinances, conventional refinances are not government-backed — but they offer flexibility, competitive interest rates, and the chance to drop private mortgage insurance (PMI).
What Is a Conventional Refinance Loan?
A Conventional Refinance Loan replaces your current mortgage with a new conventional loan. These loans follow the guidelines set by Fannie Mae and Freddie Mac and work for both rate reductions and cash-out refinancing.
Types of Conventional Refinance Loans
1. Rate-and-Term Refinance
- Replaces your old loan with a new one at a lower interest rate or different term (e.g., from 30 years to 15 years).
- Helps lower monthly payments or pay off your loan faster.
- Lets you borrow more than you owe on your current mortgage and take the difference in cash.
- Best for home improvements, debt consolidation, or large expenses.
3. High LTV Refinance (HIRO/Freddie Mac Enhanced Relief Refinance®)
- For borrowers with little equity but a good payment history.
- Helps homeowners refinance even if their loan-to-value (LTV) is high.
Benefits of a Conventional Refinance Loan
- Lower monthly payments by reducing your interest rate
- Drop PMI once you reach 20% equity — unlike FHA loans, which require mortgage insurance for the life of the loan
- Flexible loan terms (10, 15, 20, or 30 years)
- Cash-out option to use your equity for personal goals
- Potential long-term savings by refinancing into shorter loan terms
Who Qualifies for a Conventional Refinance Loan?
To qualify, you typically need:
- Credit score of 620 or higher (higher scores get better rates)
- 20% home equity to avoid PMI (though some lenders allow lower equity with PMI)
- Debt-to-income ratio (DTI) below 43%–50%
- Stable income and employment history
Conventional Refinance vs Government Refinance
Feature | Conventional Refinance Loan | FHA Streamline | VA IRRRL | USDA Streamlined Assist |
| Backing | Fannie Mae & Freddie Mac | FHA | VA | USDA |
| PMI / MIP | PMI, can be canceled | MIP required for life of loan | No PMI | No PMI |
| Credit Requirements | 620+ | Flexible | Flexible | Flexible |
| Equity Needed | Often 20% for best terms | Lower equity OK | Up to 100% financing | No appraisal needed |
| Cash-Out Option | Yes | No | Yes | No |
Choose conventional refinance if you want long-term savings, PMI removal, or flexibility.
Choose government refinance if you already have an FHA, VA, or USDA loan and need easier approval.
Things to Consider
- Closing Costs: Typically 2%–5% of the loan amount.
- PMI Requirement: If you have less than 20% equity, you may need private mortgage insurance.
- Stricter Requirements: Conventional loans generally require higher credit scores than FHA or VA loans.
At Loan Factory, we help you maximize your refinance savings:
- MOSO Technology – Instantly compare offers from 240+ lenders.
- Best Price Guarantee – If we can’t beat a competitor’s official offer, we’ll pay you $1,000 check (term).
- Flexible Options – Rate-and-term, cash-out, and high-LTV refinances available.
- Expert Guidance – Our loan officers walk you through every step.
Ready to lower your rate or tap your home equity? Start your Conventional Refinance Loan with Loan Factory today.
FAQ: Conventional Refinance Loan
