Can I Refinance With an FHA Loan? Of Course You Can!

refinance with fha loan
  • There are a number of FHA refinance options, each with their own requirements.
  • You can refinance your FHA loan to get better rates or terms.
  • You can refinance into an FHA loan from a conventional loan and vice-versa.
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So you have an FHA loan and are wondering if you can refinance.

Luckily for you, you almost always can. And there are some great refinancing options and benefits you can take advantage of.

But before you pull the trigger and commit to refinancing your loan, there is a lot that you need to weigh, and a lot you need to understand to make sure you pick the best refinancing option for you.

This guide will cover everything you need to know about FHA loan refinancing options, and the process, requirements, and benefits you can get by refinancing your FHA loan today.

When Can You Refinance an FHA Loan?

how to refinance an fha loan

Refinancing an FHA loan is an attractive option for homeowners looking for lower interest rates, cash-out options, and the end to mortgage insurance, among other refinancing benefits.

Before we talk about when you can refinance your FHA loan, here are some of the refinancing options that are generally available to you:

  1. FHA Simple Refinancing – You can use an FHA simple refinance to replace your current FHA loan to get a lower interest rate, or switch from an adjustable-rate mortgage (ARM) loan to a fixed-rate loan.
  2. FHA Streamline Refinance – An FHA streamline allows you to refinance an existing FHA loan with much less paperwork and requirements than normal, making the process faster and cheaper. In many cases, you don’t even have to get a home appraisal.
  3. FHA Cash-Out Refinance – An FHA cash-out refinance allows you to refinance into a larger loan than you currently have and pocket the difference. E.g. If you have $50k left to pay on your FHA loan, you can refinance to a new loan worth $100k. You will receive the $50k difference in cash minus the closing costs.
  4. FHA Loan to Conventional Loan – You may be able to refinance from an FHA loan to a conventional loan. This might allow you to benefit from lower interest rates, a shorter loan term, and lower monthly payments.

When you can refinance your FHA loan will be determined by when you meet the requirements for the refinance of your choice and when the benefits would be of most use to you.

Before you get overwhelmed by the various options and requirements, we’ve listed the requirements for each refinancing option below.

How Soon Can I Refinance FHA Loan to Conventional?

Unlike other refinancing options like the FHA streamline refinance which requires 6 months of mortgage payments before you can refinance, you can refinance your FHA loan to a conventional loan at any time.

But keep in mind that you will need to qualify for a conventional loan – which generally has higher requirements than an FHA loan – before you can apply for this refinance.

So how soon you can refinance into a conventional loan will be determined by how soon you can meet all the necessary requirements.

FHA Loan Refinancing Requirements

Each FHA loan refinance option comes with its own set of requirements. This table will show you what you need to qualify for each one.

FHA Simple Refinance

  • Have an FHA-insured loan
  • Meet lender’s credit qualification
  • Income and employment documentation and qualification
  • Home appraisal

FHA Streamline Refinance

  • Must own property for at least 6 months before refinancing
  • History of on-time payments for current FHA loan
  • A net tangible benefit for the borrower must be evident
  • Meet lender’s credit qualification if opting for a credit-qualifying streamline refinance

FHA Cash Out Refinance

  • Meet lender’s credit qualification
  • Must have lived in home for at least 12 months
  • Show evidence of on time mortgage payments for last 12 months
  • Maximum loan-to-value (LTV) ratio of 80%
  • Home appraisal

FHA Loan to Conventional Loan

  • Meet lender’s credit qualification (usually at least 620)
  • Debt-to-income ratio (DTI) of 43% or below
  • Proof of income
  • Home appraisal

How to Refinance an FHA Loan

The refinance process is generally the same regardless of the refinance option, but there are some differences.

As long as you meet all the requirements of your selected refinance option before beginning the application process, you should be good to go.

These are the basic steps to getting your FHA refinance.

1. Select a lender

You will need to find a local lender that offers your refinancing option of choice, has attractive rates, and has requirements that you can satisfy.

Check our rates and your eligibility in under 30 seconds for free.

2. Compile the documentation needed

To give yourself the best chance at getting your FHA refinanced, make sure you look carefully at the requirements given by your chosen lender and have all the documentation needed to prove you qualify for the refinance loan ready.

Here are just some of the documents you may need to show (documents required may differ among refinance options and lenders):

  • Proof of income
  • Current mortgage statements showing on-time payments
  • Homeowner insurance information
  • Tax documents
  • Letter of explanation for credit issues
  • Home appraisal

3. Apply to refinance your FHA loan

This should be a smooth and easy process if you have all the required documentation.

4. Pay closing costs

How you pay for closing costs is determined by the refinance option you choose.

Most FHA to conventional refinance loans and FHA simple refinance loans allow for closing costs to be included in the new loan so the borrower does not have to pay for these costs out-of-pocket.

If you are using the FHA streamline refinance or FHA cash-out refinance, you will most likely not be able to include your closing costs in the new loan and will have to pay them out of pocket.

Luckily for you, some lenders offer low or no-closing-cost refinance, and these costs are usually negotiable.

How Long Before You Can Refinance an FHA Loan?

how long before you can refinance an fha loan

Each refinance option has different requirements on how long you have to have your current FHA loan before applying for a refinance.

FHA streamline refinance loans require that at least 210 days pass from when you closed on your current mortgage and that you make at least 6 months’ worth of on-time mortgage payments on your current FHA loan.

FHA cash-out refinance loans require you to have lived in your home for at least 12 months and have at least 12 months of on-time payments on your mortgage.

FHA simple loans require you to show at least 6 months’ worth of on-time mortgage payments on your current FHA loan.

FHA to conventional loans do not have a set time limit of how long you must hold your current FHA loan before you can apply for refinancing. Some lenders, however, may make their own requirements in this regard.

Should I Refinance My FHA Loan?

Whether you should get an FHA loan refinance or not depends on what your needs and wants are for your loan. Here’s everything broken down based on some goals you may be considering:

FHA Simple Refinance

  • Want to keep their out-of-pocket costs low
  • Want to benefit from a lower interest rate
  • Want to switch from ARM to fixed interest rates or vice versa

FHA Streamline Refinance

  • Are looking for a speedy refinance process
  • Want to benefit from a lower interest rate
  • Do not want to pay for a home appraisal

FHA Cash Out Refinance

  • Want to liquidate some of their home equity to use the cash for their own purposes
  • Want to benefit from a lower interest rate

FHA to Conventional Refinance

  • Have improved credit scores and income
  • Have grown equity in their home
  • Want to stop paying mortgage insurance

Get The Best Rates and Terms by Refinancing your FHA Loan

Refinancing your FHA loan allows you to benefit from lower interest rates in the market.

Refinancing also allows those who have succeeded in raising their credit score or income to reward themselves by getting a loan with better terms and less or no insurance.

If you still have questions about refinancing your FHA loan, give us a call.

Frequently Asked Questions

Can you refinance a non-FHA loan to an FHA loan?

Yes, you can. Because FHA loans are government-backed, they can offer homeowners more flexible requirements, making this a great option for conventional loan holders who do not have high credit scores but still want competitive loans.

We should add that some FHA loan requirements are not required for a refinance. For example, you do not have to meet the FHA down payment requirements, but lenders may instead have LTV (loan to value ratio) requirements.

For more information, give us a call.

What credit score is needed for FHA refinance?

FHA credit score requirements are very flexible. You can technically get an FHA refinance with a credit score as low as 500, but you might struggle to find lenders who will be willing to accept a credit score that low. Lenders who will accept a credit score of 580 will most likely charge a higher interest rate to offset their risk.

Can I refinance my FHA loan in a 203k FHA loan?

Yes you can. A 203k loan is useful for homeowners wanting to remodel or renovate their homes. If you meet all the requirements for a 203k loan and choose to refinance, your new loan amount will consist of the old loan amount plus the costs of the renovation or remodel.

How much FHA refinance loan do I qualify for?

Because a refinance is essentially getting yourself a new FHA loan, how much you will get with your refinance will be determined by how much FHA loan you qualify for.

The amount you qualify for will be influenced by FHA loan limits, your credit score, your DTI, and other factors.