The Quick Read: You don’t convert an FHA loan. You take out a brand-new conventional mortgage that pays off the FHA loan and hands you the leftover equity as cash. The FHA mortgage insurance ends because the FHA loan ends. The tradeoffs are a lower leverage cap on duplexes through fourplexes, a six-month reserve requirement, and a new appraisal that decides how much cash you can pull. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Key Takeaways
- The new loan is a fresh conventional cash-out refinance, with its own appraisal, underwriting and closing costs.
- On a 2-4 unit home you live in, conventional cash-out generally tops out at 75% of value. A one-unit home gets 80%.
- Your FHA loan usually needs to be at least 12 months old, and one borrower needs six months on title.
- Rent from the units you don’t live in can help you qualify, at a discount. Rent from your own unit generally can’t.
- FHA’s own cash-out option reaches 80%, so conventional is not automatically the bigger check.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
What Does Moving a 2-4 Unit Primary Home From FHA Actually Involve?
Two loans change hands. The conventional lender writes a new first mortgage. The title company uses part of those funds to pay off your FHA servicer. Whatever remains, after closing costs, comes to you.
That’s the whole mechanism. Nothing transfers. Nothing converts.
Because it’s a new loan, the conventional lender’s rulebook governs it. Your FHA loan’s rules only matter for what you’re leaving: its payoff, its age and the mortgage insurance attached to it.
The FHA premium is worth understanding before you leave. On the wholesale FHA programs we see most often, the borrower pays an upfront premium of 1.75% of the base loan, usually financed into the balance. An annual premium also applies, ranging from 0.15% to 0.75% of the balance depending on term, loan amount and LTV. LTV, or loan-to-value, is the loan balance divided by the home’s appraised value. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years.
So a borrower who put 3.5% down on a duplex years ago may still be paying that premium. That is the usual reason people explore leaving. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Should You Leave FHA at All?
Not always. Moving to conventional makes sense when the mortgage insurance bill is large, your credit and equity are strong, and you want cash. Staying in FHA, or using FHA’s own cash-out, can win when your equity is thin or your credit is still rebuilding.
Here is how the main paths compare for an owner-occupied 2-4 unit home:
| Path | What happens to the FHA loan | Mortgage insurance | Fits best when |
|---|---|---|---|
| Keep it as is | Stays in place | Continues | Terms are fine, no cash needed |
| FHA streamline | Replaced by a new FHA loan | Premium continues | You want a lower burden, no cash |
| FHA cash-out | Paid off by a new FHA loan | New FHA premiums | Credit is modest, equity is solid |
| Conventional cash-out | Paid off by a conventional loan | Generally none inside the leverage cap | Credit and reserves are strong |
The FHA streamline is not a cash-out product. Don’t expect cash from it.
If you want to see how FHA’s own equity option works, Lendmire’s FHA cash-out refinance program page lays it out. FHA cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. HUD’s own handbook update confirms the 80% maximum for FHA cash-out refinances. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Now the surprise. For a duplex, triplex or fourplex, FHA’s cap is higher than the conventional one. So this is not a “conventional lets you take more” story. It is closer to “conventional lets you leave the premium behind, and leaves you with more equity in the building.”
The occupancy rule decides which leverage applies. If you’ve moved out, the home is no longer a primary residence and the numbers change, so confirm your situation with a loan officer before you plan around primary-home leverage.
What Clocks Do You Have to Clear?
Three checks come first: the age of your FHA loan, your time on title, and whether the home is listed for sale. Fail any one and the file stops before it starts.
The conventional cash-out rules in the Fannie Mae Selling Guide set them out:
1. Loan age. The mortgage being paid off must be at least 12 months old, counted from its note date to the new loan’s note date.
2. Time on title. At least one borrower must have been on title for six months before the new loan funds.
3. Listing status. If the home was listed for sale, it must come off the market by the new loan’s disbursement.
The first clock trips up more borrowers than any other. A recent FHA closing counts. So does a recent FHA streamline, since the streamline created a new note. Refinanced into FHA last spring? Wait it out.
Title time has exceptions for inherited homes and certain divorce situations. Neither fits most FHA borrowers, so don’t plan around them.
How Does a 2-4 Unit Differ From a One-Unit Home?
Duplexes through fourplexes get tighter treatment in two places: leverage and reserves. Both can surprise someone who has a single-family friend with an easy cash-out story.
| Factor | One unit, primary home | 2-4 units, primary home |
|---|---|---|
| Conventional cash-out cap | 80% | 75% |
| Reserves | None, unless DTI is above 45% | Six months |
| Appraisal | Standard single-family | Multi-unit with rent schedule |
The leverage figures come from the Fannie Mae Eligibility Matrix. The reserve rules come from the Fannie Mae reserve requirements, which call for six months on a 2-4 unit principal residence. Six months also applies to any cash-out with a debt-to-income ratio above 45%, which is why the one-unit column carries that exception. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Reserves are liquid money left in your accounts after closing. Think of them as proof you can cover the building’s payments if a unit sits empty. Ask the lender whether any of your cash-out proceeds can count toward them, because the answer shapes how much you need on hand.
One more difference sits on the FHA side. For three- and four-unit homes, FHA historically adds a test on whether the building’s rent can carry the loan. Conventional uses a different structure. That can matter if your property was a stretch under FHA’s test at purchase.
How Is Rent From the Other Units Treated?
The rent from units you don’t live in can count toward qualifying, but not at face value. The rent from your own unit generally can’t count at all.
The Fannie Mae rental income rules say the lender must report the building’s gross monthly rent on 2-4 unit primary residences, whether or not you use it to qualify. When it is used, a vacancy-and-expense discount is applied. Lenders look for current leases and the appraiser’s rent schedule to support it.
Picture a fourplex where you live in one unit and rent out three. Only those three leases help your income, and only after the discount. The fourth unit is your housing, not your income.
Newly rented units deserve extra attention. If you moved out of one apartment last year and rented it, the lender may want current leases rather than tax history. Gather those early. It’s one of the cheaper ways to prevent a stall.
What Does the Process Look Like Step by Step?
The path is the same for most borrowers. The order matters more than any single step.
1. Run the eligibility screen. Check your FHA note date, your time on title and your listing status.
2. Estimate value and payoff. Your FHA payoff includes the balance and interest up to payoff. The new loan has to fit the 75% cap once everything is added up.
3. Gather documents. Expect leases for the rented units, proof you live in the building, income documents and statements for your reserve accounts.
4. Order the appraisal. A 2-4 unit appraisal includes interior and exterior inspection, plus a rent schedule. The value drives the maximum loan.
5. Underwrite. The lender reviews credit, debt-to-income ratio, reserves and rent.
6. Review your Loan Estimate. It shows the estimated cash to close and the costs. Compare offers line by line and ask the lender to explain anything that surprises you.
7. Sign and wait out the rescission window. Because this is a refinance of your primary home, a short right-of-rescission period applies before funds go out.
8. Payoff and cash release. The title company pays the FHA servicer. What remains reaches you. Cash-out proceeds are unrestricted in use on the conventional product.
What Does a Real File Look Like?
Say your building appraises at 100% of value, and your FHA balance sits at 60% of that value. Those are modeled assumptions, not market data.
Conventional caps the new loan at 75%. That leaves 15 points of value (75% minus 60%) as the most cash you could pull. Closing costs come out of those 15 points. What survives is your cash.
Now compare staying in FHA. FHA cash-out reaches 80%, so the same building leaves 20 points of room (80% minus 60%). That’s five more points of value, before costs.
That is the tradeoff in plain numbers. Conventional gives you less cash on this building. In return you get out from under the FHA premium, and you keep 25% equity in the home instead of 20%.
A conservative appraisal shrinks the room fast. If the building comes in a few points lower, the cash shrinks with it. Don’t spend money you haven’t seen on a Closing Disclosure.
Does It Pencil? A Simple Break-Even Test
Ask four questions in order:
- Is the premium material? Estimate what you pay in annual FHA premium and how many years remain on it. The longer it continues, the more leaving is worth.
- What do closing costs total? A new loan means a new appraisal, title work and lender charges. Your Loan Estimate shows them.
- Does the payment fall? It depends on the new loan’s terms and balance. A cash-out loan usually increases the balance, which pushes the other way.
- How long will you stay? Closing costs pay back over time. A short horizon favors keeping what you have.
If the premium is large, you plan to stay and the equity you’re pulling serves a clear purpose, the switch often makes sense. If you’re borderline on three of four, it probably doesn’t.
Mortgage insurance on the new loan is conditional. Inside the 75% cap, a conventional loan generally carries no private mortgage insurance. The lender confirms that on your file.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Where Does the General Rule Break?
Several situations change the answer:
- A recent FHA loan or streamline. The 12-month note-date rule blocks cash-out until the clock clears.
- Co-ops and attached condo units. The matrix excludes some of these from the transaction types discussed here. Verify with your lender before assuming a 2-4 unit condo fits.
- Higher-balance loans. Some leverage allowances don’t extend to high-balance or manually underwritten files. Ask your loan officer.
- Moved-out owners. Once you stop living in the building, primary-home leverage and pricing no longer apply.
- Lender overlays. A lender can set rules stricter than the agency’s. Some set a higher credit floor than FHA programs do. The wholesale FHA programs Lendmire works with start at a 580 decision score, and conventional pairs score tiers with leverage, so strong credit matters more here.
Also worth knowing: FHA’s own ratios run from 31/43 with no compensating factors up to 40/50 with documented factors, and an automated finding governs most files. Conventional underwriting uses a different structure. A borrower who squeaked through FHA on ratios may need to re-check the math.
Where Do Files Usually Stall?
| Stall point | Why it happens | Fix |
|---|---|---|
| FHA loan too new | Under 12 months from note date | Wait for the clock |
| Low appraisal | Value drops below plan | Tighten the loan request |
| Thin reserves | Six months required | Build liquid savings first |
| Rent mismatch | Leases differ from rent schedule | Update leases early |
| Occupancy doubt | Lender can’t verify you live there | Gather proof of residence |
Key Terms Defined
Cash-out refinance: A new mortgage larger than what you owe, with the difference paid to you.
LTV (loan-to-value): The loan balance divided by the home’s appraised value.
Note date: The day you signed the loan’s promissory note, used to measure how old a loan is.
Reserves: Liquid funds left after closing, measured in months of the home’s housing payment.
Mortgage insurance: Coverage that protects the lender, not you, if a loan goes bad. FHA calls its version a mortgage insurance premium.
Loan Estimate: The standard form that shows a loan’s costs and estimated cash to close.
Where to Go From Here
Start with the clocks. If your FHA loan is old enough and you’ve been on title past six months, line up your leases, check your reserves and weigh the premium you’d leave behind.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I do a conventional cash-out on a fourplex I live in?
Yes, if you meet the age, title and reserve rules. A fourplex you occupy is treated as a principal residence, with a leverage cap of 75% and six months of reserves. Subject to lender guidelines, credit approval and a property review.
Do I have to keep living there?
For primary-home terms, yes. Leverage and pricing for a primary residence apply only while you occupy one of the units. If your plans are changing, tell the loan officer before you apply.
Does FHA mortgage insurance end if I refinance?
Yes, because the FHA loan is paid off. The new conventional loan doesn’t carry it over. Inside the 75% cap, the new loan generally carries no private mortgage insurance either, but your lender confirms that.
Does FHA mortgage insurance drop off at 80% like private insurance?
Not the same way. FHA follows its own schedule. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Can rent from the other units count toward qualifying?
Yes, at a discount, and with leases or an appraiser’s rent schedule behind it. The rent from the unit you occupy generally doesn’t count.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Handbook 4000.1 Update 7
2. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
4. Fannie Mae Selling Guide: Minimum Reserve Requirements
5. Fannie Mae rental income rules
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Leave an FHA Loan for Conventional and Cash on a 2-4 Unit Home · Can You Use FHA Cash-Out Proceeds for Any Home Renovation? · How to Prepare a 2-4 Unit Primary Home for an FHA Cash-Out Appraisal
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.