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:
Tera Technology – Instantly compare offers from 240+ lenders 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 .
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This content is for informational purposes only and not a commitment to lend. Loan terms, rates, and approval depend on credit, underwriting, and investor guidelines.
FAQ: Conventional Refinance Loan 
