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Some home buyers in Washington start off using one type of mortgage loan and then switch to another prior to closing. While not an ideal scenario, it’s possible to make this kind of switch and still close on the home successfully.
One of the most common scenarios is when a person switches from an FHA loan to conventional financing prior to closing on a home in Washington.
Whether it’s wise to do so will depend on your financial situation, the lender you use, local market conditions, and other factors. So let’s explore these considerations.
Many home buyers in Washington are surprised to learn that both FHA and conventional home loans are issued by mortgage lenders in the private sector. That much is true.
But these two mortgage options in Washington also differ in some important ways, which partly explains why some people end up switching from FHA to conventional (or vice versa).
The following distinctions between an FHA vs. conventional loan in Washington will become important as we proceed with this guide:
So the main difference has to do with mortgage insurance for FHA vs. conventional loans. In other words, these loans can be distinguished by government backing for FHA loans and the fact that they always require mortgage insurance. FHA loans are generally easier to obtain as well.
Getting back to the question at hand: Is it possible to switch from an FHA loan to conventional financing before closing on a home in the state of Washington?
This question assumes that a home buyer has already been pre-approved for an FHA-insured home loan and started house hunting. They might even have a signed agreement with a seller.
In the state of Washington, there is nothing that forbids or prevents a person from changing to conventional financing after they start off with an FHA loan.
But it’s not as simple as flipping a switch. FHA and conventional mortgages have different requirements, and changing from one to another could delay the closing.
You’ll also need to check with your mortgage lender to see if it’s possible, based on where you are in the mortgage process, your qualifications, etc.
Most home buyers in Washington end up using the type of mortgage loan that they started with. This is the most streamlined approach, since it doesn’t throw a wrench into the works.
But there are times when a borrower might want to switch from FHA to conventional financing, prior to their scheduled closing date.
Here are some of the most common reasons for making this change:
Here are some of the things home buyers should consider before switching loan types.
Switching from FHA to conventional could add time onto the mortgage process. A new loan application, underwriting, and potentially a new appraisal need to be completed. So be prepared for a possible closing delay.
The closer you are to closing, the tighter the timeline becomes. Switching loans late in the process can significantly increase the chance of a delayed closing, which could lead to other problems. To minimize this risk, act quickly and communicate with your lender.
Switching from FHA to conventional might require another home appraisal. In addition to extending the overall mortgage process timeline, this could bring an additional expense for the borrower. Factor in the time and potential cost for a new appraisal before choosing this route.
The conventional loan terms, interest rates, and closing costs will likely be different from your FHA loan. Carefully compare terms for both options to find out if the switch will work to your advantage.
If you had locked in an interest rate for your FHA loan, switching to a conventional loan might mean losing that rate lock. You’ll need to secure a new rate lock for the conventional loan, which could be higher or lower depending on current market conditions.
If switching from an FHA loan to a conventional loan before closing isn’t an option due to lender restrictions, timing issues, or qualification challenges, here are some alternative solutions:
If you can’t switch before closing, you can still use the FHA loan to buy the home and refinance into a conventional loan later.
If avoiding mortgage insurance is the primary reason for switching, consider putting more money down on the FHA loan.
If your lender won’t allow a switch to a conventional loan, explore other conventional low-down-payment options, such as:
If switching isn’t allowed due to credit or debt-to-income ratio (DTI) issues, delaying the home purchase by a few months could help:
Here’s the most important point to take away from this guide:
It is possible to switch from FHA to conventional financing before closing on a home in Washington. But it’s not always a simple process, and it might disrupt your scheduled closing.
If you do decide to make the switch, contact your lender or mortgage broker ASAP.
Early communication can help prevent unwanted delays. With enough advance notice, your lender might even be able to preserve your original closing timeline.
If you’re looking to buy in Washington, we can help. At Sammamish Mortgage, we offer various mortgage options for you to choose from. Visit our website to get an instant rate quote or call us today to have your mortgage questions answered!
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.