- 1). Gather your loan paperwork and income documents. Before your loan officer can process your new loan, she will need copies of your most recent mortgage statement from FHA, the last two W-2s (income tax returns if self employed), two weeks worth of pay check stubs and most recent statements from bank, stocks and retirement accounts. If you have filed bankruptcy in the last five years, make a copy of your discharge paperwork.
- 2). Determine the equity in your home. To refinance out of your FHA loan, you must have enough equity to avoid paying closing costs, or covering a portion of your loan payoff out-of-pocket. To determine your equity, subtract the estimated amount you owe FHA from the estimated value of your home. For example, if you owe $177,000 to FHA and your home is worth $220,000, you would have $43,000 in home equity.
- 3). Shop for conventional interest rates. Call the banks and mortgage companies in your area and ask for quotes on interest rates on their conventional mortgage programs. Keep in mind, however, rates for obtaining cash-out after your FHA loan is paid, may be slightly higher than those on programs meant to only pay off a first mortgage.
- 4). Apply for a conventional home loan. Complete the application paperwork and furnish your loan officer with copies of your income documents and financial statements. You must also have your home appraised. Depending your property type, residential real estate appraisals typically cost from $250 to $500.
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