An FHA loan is a mortgage issued by FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, which require a lower minimum down payments and credit scores.

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FHA Loans and Refinancing – What are your Options?

FHA loans, like most loan programs, have a few refinancing options. If you want a lower interest rate, different term, or to tap into your home’s equity, there’s an FHA refinancing option for you.

FHA Refinance Overview

The FHA has more refinancing options than other loan programs, thanks to its government-backing. Whether you have an FHA loan now or have other financing but want to take advantage of what the FHA offers, here are your options:

  • FHA Simple Refinance – This standard refinance option refinances your loan so you get a lower interest rate or better term. Lenders fully verify your qualifying factors including your credit score, income, debts, and home value. You may not take cash out of your home’s equity with this program.
  • FHA Streamline Refinance – Only current FHA borrowers that have had their loan for at least 210 days and made their last 12 monthly payments on time qualify. This program is only for borrowers that benefit from refinancing with a lower rate, lower payment, or better term. Lenders don’t verify your credit, income, or home value for this program.
  • FHA Cash-Out Refinance – If you have equity in your home (your home is worth more than you owe), tap into your home’s equity with this program. You may borrow more than your current loan value and up to 80 percent of your home’s value, using the funds as you want.
  • FHA 203K Refinance – If you’re considering major home renovations, the FHA 203K loan provides funds to refinance your current loan, plus cover the renovation costs up to 115 percent of the after-repaired value.
Choosing the Right FHA Refinance Program

How do you know which FHA refinance is right for you? Ask yourself the following questions:

  • Do you have a current FHA loan? If so, what are your plans with it? Are you looking for a lower interest rate or payment? Do you want a less risky term (such as refinancing from an ARM to a fixed-rate loan)? The streamline FHA refinance may be a good option.
  • Do you have equity in your home? Take your estimated home value and subtract your current loan balance. That’s your home equity. For example, if your home is worth $300,000 and you owe $200,000 on it, you have $100,000 in equity. If you need money for home renovations, paying for college, unexpected medical expenses, or debt consolidation, you may tap into the equity, using up to 80 percent of the home’s value. In our example, you could borrow up to an extra $40,000 with the FHA cash-out refinance.
  • Do you have an FHA loan and want a conventional loan? If you have enough equity (at least 20 percent) and have great credit, you may refinance from an FHA loan to a conventional loan. While conventional loans have stricter requirements, they don’t have annual mortgage insurance or PMI (if you owe less than 80 percent of the home’s value).

I’ve worked with FHA borrowers for many years. I understand the refinancing options and how to help you choose the right solution for your situation. I’m happy to sit down with you and discuss your refinancing options whether you want a lower payment, a better rate, or want some of the equity that’s in your home.

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