Conventional refinance rates and guidelines for 2022

Tim Lucas
Tim Lucas
The Mortgage Reports Editor
December 7, 2021 - 12 min read

Lower your rate with a conventional refinance

A mortgage is the biggest financial investment in most people’s lives. Refinancing yours could result in lower monthly mortgage payments, shorter loan terms, dropping mortgage insurance, and even getting cash out from your home’s equity.

If you have yet to take advantage of today’s historically low conventional refinance rates, then now may be a good time to lock in a lower interest rate while they are still available.


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>Related: 7 Tips to get the best refinance rate

What is a conventional refinance?

A conventional refinance involves replacing your existing home loan with a new conventional mortgage. This type of refinancing is flexible; you can use a conventional refinance to get a lower interest rate, cash-out equity, shorten your loan term, refinance a rental property, and more.

Your current loan doesn’t have to be conventional to qualify. You can use a conventional refinance to replace an FHA loan, USDA loan, or any other type of mortgage with a low-rate conventional loan.

Today’s conventional refinance interest rates

Mortgage rates for conventional loans are low thanks to strong backing by two of the world’s largest lending agencies: Fannie Mae and Freddie Mac.

These two companies have been in government “conservatorship” since the housing downturn in 2008. This means conventional loans come with an implied government guarantee that reduces mortgage interest rates for home buyers and borrowers alike.

These fixed mortgage rate estimates are updated daily, with the lowest rates going to borrowers who lock in when they drop.

Compare refinance rates for July 6, 2022

Conventional 30-year fixed-rate loan% (% APR) 
Conventional 15-year fixed-rate loan% (% APR) 
FHA 30-year fixed-rate loan% (% APR) 
FHA 15-year fixed-rate loan% (% APR) 
VA 30-year fixed-rate loan% (% APR) 
VA 15-year fixed-rate loan% (% APR) 

*Interest rates and annual percentage rates for sample purposes only. Your own rate will be different. See our rate assumptions and advertising disclosures here.

Keep in mind that the cost of borrowing extends beyond your loan’s rate.

There are upfront costs when refinancing like origination fees, underwriting fees, appraisals, homeowners insurance, and other closing costs.

Borrowers can roll these closing costs into their loans, though often lower interest rates will go to those who pay closing costs upfront. You may also pay higher rates for jumbo loans, which are mortgage loans above conforming loan limits.

Conventional loans are nearly in the same class as FHA loans. While conventional loan backing is not explicit as it is with FHA, many argue that the implied guarantee is keeping conventional mortgage rates artificially low.

How can I use a conventional refinance?

A conventional refinance loan is one of the most flexible refinancing products in the real estate market. Homeowners are using this refinance option to accomplish a wide array of home finance goals.

1. Conventional refinancing for non-owner occupied residences

One flexibility offered by this type of loan is around occupancy type.

Government-backed loans like FHA loans, VA mortgages, and USDA home loans are intended to help home buyers get into single-family homes and can be used only for a primary residence, i.e. the home you live in.

A conventional refinance loan, though, can be used for a primary residence, second home, or investment property (rental). Keep in mind your rate may take a hit depending on the property’s use — investment properties are often the most expensive.

2. Cash-out / debt consolidation conventional refinance

You can also use a conventional cash-out loan to tap into your home equity. For example, if you owe $200,000 on a home worth twice as much, you can take out a loan for $300,000, replacing the former loan and receiving cash back at closing.

These proceeds can be used for any purpose: home improvement, debt consolidation, college financing, and more.

A conventional loan, then, may get you lower monthly payments by paying off expensive credit cards, auto loans, and other expenses.

A conventional refinance can even be used to take cash out of a rental property or second home. For real estate investors, this is an excellent way to remove equity from existing properties to purchase additional ones.

3. Cancel FHA or USDA mortgage insurance

Many first-time home buyers choose a government-backed mortgage to get into their first home.

And for good reason.

Government-sponsored programs are flexible on credit scores and down payments. However, they come at a cost.

  • FHA loans include a monthly mortgage insurance premium (MIP) of $71 per month per $100,000 borrowed
  • USDA home loans, too, come with a monthly fee, typically $29 monthly per $100,000 in loan amount

These fees are well worth homeownership. But owners don’t necessarily want to pay the fees for the life of the loan when they build enough home equity to cancel these payment amounts.

A conventional refinance exchanges an FHA or USDA loan for a conventional one, thereby eliminating associated monthly fees. And, with 20% or more equity, you pay no mortgage insurance on the new conventional loan.

If you don’t have 20% equity yet, you can still look at a conventional refinance with mortgage insurance.

Home values are way up compared to just a few years ago, and homeowners are realizing their equity makes holding government-sponsored loan fees unnecessary.

4. Refinance out of any type of mortgage

Many Streamline Refinance loan options require you to have a certain type of mortgage to use the program.

A VA Streamline Refinance requires you to have a VA loan already, and the popular FHA streamline has a similar requirement.

But a standard conventional refinance can replace any type of mortgage:

  • FHA
  • VA
  • USDA
  • Sub-prime
  • Option ARM
  • Alt-A
  • Standalone second mortgage
  • First and second mortgage combo

In addition, mechanic's liens, tax liens, and judgments on your home’s title can be paid off with a conventional loan.

There are absolutely no restrictions on your current financing type to use a conventional refinance.

5. Reimburse a cash home purchase

You can use a conventional refinance to reimburse yourself for a home paid for in cash.

The “delayed financing rule" allows you to make a quick purchase using cash — as is often required with foreclosures and homes on the auction block — without permanently depleting cash reserves.

Prior to the inception of this rule, investors had to wait six months to obtain a cash-out refinance on a home they just purchased. The rule eliminates that waiting period, as long as these requirements are met:

  • The cash used for the original purchase must be documented to the bank
  • The new loan size may not exceed the property’s original purchase price
  • A title search must show that no liens exist on the home

The buyer must prove the home sale actually occurred and that no loan was taken on the home. A final HUD-1 document is adequate proof.

2022 conventional loan limits

Loan limits are higher for conventional refinance loans in 2022. The standard loan limits are based on the number of units in the home. The maximum number of units for a conventional loan is four.

  • The conventional loan limit for a 1-unit home: $
  • The conventional loan limit for a 2-unit home: $
  • The conventional loan limit for a 3-unit home: $
  • The conventional loan limit for a 4-unit home: $

Limits are higher in designated high-cost areas.

For example, a one-unit home in Los Angeles, California can be financed up to $ with a conventional mortgage, and a 2-unit home in Alabama is allowed a loan up to $.

Search for conventional loan limits for any U.S. county with our loan limits tool.

Loan-to-value (LTV) maximums for conventional refinance loans

Maximum loan-to-value ratios will vary depending on the loan purpose, type of property, and whether the new loan is a fixed-rate mortgage (FRM) or adjustable-rate mortgage (ARM).

For instance, lenders allow a much higher LTV for a primary residence than for a non-owner-occupied property.

Loan-to-value, or LTV, is the comparison between the loan amount and the property value. The higher the loan amount compared to home value, the higher the LTV.

Refinance primary residence: Max. LTV

UnitsFixed RateARM
Standard Refinance1-unit97% LTV95% LTV
2-unit85% LTV85% LTV
3-4 unit75% LTV75% LTV
Cash-Out Refinance1-unit80% LTV80% LTV
2-4 unit75% LTV75% LTV

Refinance second home: Max. LTV

UnitsFixed RateARM
Standard Refinance1-unit90% LTV90% LTV
2-4 unitnot eligiblenot eligible
Cash-Out Refinance1-unit75% LTV75% LTV
2-4 unitnot eligiblenot eligible

Refinance investment property: Max. LTV

UnitsFixed RateARM
Standard Refinance1-4 unit85% LTV85% LTV
2-4 unit75% LTV75% LTV
Cash-Out Refinance1-unit75% LTV75% LTV
2-4 unit70% LTV70% LTV

The above are standard eligibility maximums for traditional conventional refinances.

Conventional refinance credit score minimum

This refinance type is available down to a 620 score, or even lower in some cases.

At least, those are official Fannie Mae and Freddie Mac guidelines.

Many mortgage lenders will set a higher minimum around 640. But it should be noted that conventional loan rates are risk-based, unlike government-backed programs like those offered by the Federal Housing Administration (FHA).

Fannie Mae publishes loan-level price adjustments, or LLPAs, which raise rates for applicants with higher loan-to-value (LTV) ratios and lower credit scores.

For instance, a homeowner with a 680 credit score and a loan-to-value ratio of 80% will pay an additional fee of 1.75% of the loan amount, compared to an applicant with a 740 score and 60% LTV. Those additional fees can be paid in cash, wrapped into the loan amount, or taken as a higher rate.

A 1.75% fee translates to an approximate one-quarter of 1% increase in interest rate.

For this reason, homeowners with very low credit scores should consider an FHA refinance, or put strategies in place to increase their credit scores prior to entering the application process.

Conventional Streamline Refinance

Many borrowers ask if there is a Streamline Refinance for their conventional loans. Streamline Refinances are popular choices for FHA and VA loans. No appraisal is required for these programs, and, often, income and asset documentation requirements are waived.

Technically, there are no conventional streamline programs, but, thanks to new regulations, more conventional refinances can be done without an appraisal. Skipping an appraisal can save you $500 or more.

Additionally, the mortgage lender may only need minimal income documentation for strong mortgage applications.

  • For instance, a nurse has been on the job for more than two years. The loan officer may only need to call the applicant’s employer to verify continued employment.

The requirement for pay stubs, W-2s, and tax returns may be waived entirely.

For some refinance types, Fannie Mae or Freddie Mac already own the loan and have on file the original documentation.

These agencies are streamlining the process more each year so homeowners have easier access to lower payments.

Private mortgage insurance (PMI) for conventional refinances

Conventional mortgages do not require an upfront funding fee or mortgage insurance premium as do FHA, VA, and USDA loans. And, no monthly mortgage insurance is required with 20% or more equity.

But homeowners can refinance into conventional if they do not have a full 20% in home equity. In these cases, private mortgage insurance (PMI) will be required.

A homeowner may want to refinance into conventional — even with a PMI payment — because conventional private mortgage insurance is cancelable, unlike that of FHA and USDA loans.

Conventional PMI drops off when you hit 80% loan-to-value ratio.

So you could replace an FHA loan with a conventional loan with PMI, for instance, then cancel PMI in a few years.

With high credit scores, conventional PMI is quite affordable, and, in some cases, is cheaper than FHA mortgage insurance.

Canceling FHA mortgage insurance with a new conventional loan can be a very wise strategy.

Conventional refinance FAQ

I was considering an FHA streamline. Should I request a conventional refinance instead?

It is worth seeing if you have enough equity for a conventional refinance. The advantage of a conventional loan is that your mortgage insurance is cancelable or you may not need it at all.

My appraisal came in low. What now?

Some lenders offer an appraisal rebuttal process, but claims are not typically successful. If it turns out you don’t have enough equity, consider going through with the refinance. It’s okay to take on cancelable conventional PMI if you are still saving money or putting yourself in a better financial situation.

Can I get a conventional adjustable-rate refinance mortgage?

Yes. Conventional refinance ARMs are a popular choice, especially for those planning to pay off their current mortgage loan, sell the home, or refinance in 5-7 years. ARMs offer an ultra-low rate, fixed, for a certain number of years (for instance five years fixed for a5-year ARM). Adjustable conventional loans come with built-in safeguards. So the loan’s upward rate adjustment — if it goes up at all — is typically no more than one to 2% each year.

Do all mortgage lenders offer conventional refinances?

Not all, but most. Conventional refinances are the most popular of all refinance types. It’s safe to assume that nearly every lender in your city offers conventional mortgages.

How do I get a conventional refinance?

First, get written quotes from 3-4 lenders on the same day. That will help you determine which mortgage lender is offering the best value. From there, proceed through both the application process and underwriting process. Your lender of choice will guide you through both these steps.

What are discount points?

Discount points are upfront fees that you can pay to your mortgage lender to get a lower interest rate on your loan. Buying down your rate with discount points can be a good idea for borrowers who plan on staying in their properties for the long haul. But for those who plan on refinancing or selling sooner, discount points may not make sound financial sense.

What are today's conventional refinance rates?

Mortgage rates are low for all loan types, conventional refinances being no exception.

Get a quote with no obligation to proceed. Check today’s mortgage interest rates at the link below to get started.


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