Since 1934, the Federal Housing Administration (FHA) has been helping more borrowers obtain a mortgage who may have had trouble qualifying for a conventional one. The mortgage we’re referring to is the aptly named FHA loan. With more flexible requirements like a low down payment and lenient credit requirements, the FHA loan is as popular as ever among homebuyers.

The FHA also offers great refinancing options, whether you’re an existing FHA borrower or not. And if you’re thinking about a refi, you’ve come to the right place. From an FHA streamline refinance to an FHA cash-out refinance, below we highlight your FHA refi options and how you may qualify for each.

The FHA Streamline Refinance

An FHA streamline refinance is for existing FHA loan borrowers to capitalize on low rates by refinancing quickly and efficiently, hence the name. There’s a lot to love about this option. It has reduced credit and underwriting requirements, no income or employment verification, and no appraisal needed.

Here are the eligibility requirements of an FHA streamline refinance:

  • You’ve made on-time mortgage payments for the last six months
  • It’s been at least six months since your first payment due date
  • 210 days have passed since the closing date of the loan being refinanced

Finally, the refinance must result in a demonstrated financial benefit to you, such as a lower payment or shorter loan term.

Cash-Out for New and Existing FHA Borrowers

An FHA cash-out refinance is an option for both existing FHA loan borrowers and conventional loan borrowers looking to cash out into an FHA loan. Here, you would refinance your existing loan and access the remaining equity in the form of cash.

These are the requirements of an FHA cash-out refinance:

  • A credit score of at least 580, with more favorable terms for 600 or greater
  • Maximum loan-to-value ratio of 85%, or cash out with as little as 15% equity
  • Maximum debt-to-income ratio to qualify is 43%
  • Pay an upfront mortgage insurance premium, and then a monthly insurance payment (learn more here)
  • A home appraisal must be completed

So, if you’re looking to get your hands on cash to go toward things like credit card debt, college tuition, home improvement projects, and more, an FHA cash-out refinance could be the answer.

Refinancing an FHA Loan into a Conventional Loan

If you’re an FHA borrower, you’re not limited to only refinancing into another FHA loan. As you pay down your mortgage (and if your home value has risen), you may have enough equity to refinance out of an FHA loan and into a conventional loan, like a fixed rate or ARM. Though conventional loan rates are slighter higher, your mortgage insurance payments may be much less than those of an FHA loan. Plus, in some cases, FHA loan insurance is permanent, and that is not always the case for a conventional loan.

Refinancing a Conventional Loan into an FHA Loan

Refinancing into an FHA loan from a conventional one is a great option for those homeowners who would like to refi, but don’t have a stellar credit score to qualify for a conventional refinance. As we said earlier, your rate will be lower with an FHA loan, but you will have to pay mortgage insurance, potentially for the life of the loan.

Now that you’re primed on the guidelines of an FHA refinance and what it can offer you, let’s continue down the refinancing path…to the things you want to avoid. Get a leg up on the 5 Biggest Refinancing Mistakes.

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