Can an FHA Loan Be Refinanced Later On Down the Road?

We receive a lot of FHA-related questions from our readers that relate to mortgage refinancing. One of the most common questions is: Can you refinance an FHA loan down the road?

The short answer is yes, you can definitely refinance a Federal Housing Administration insured mortgage loan. But you will have to meet certain minimum requirements for refinancing, just like you did when you first applied for the loan.

In fact, one of the advantages of using this particular program is that eligible borrowers can do a “streamline” refinance with less paperwork and no home appraisal. And we will talk about that in a moment.

So yes, generally speaking you can refinance an FHA loan down the road. You can refinance it into another FHA loan, using the streamline strategy mentioned earlier, or you can use refinancing to switch from a government-backed mortgage to conventional financing.

In-Depth: Can You Refinance an FHA Loan?

Let’s talk about what mortgage refinancing is exactly. When you refinance your home, you are basically replacing your current mortgage loan with a new one.

Homeowners do this for different reasons.

  • Some use a cash-out refinance to convert some of their home’s equity into cash.
  • Some refinance to switch from an unpredictable adjustable-rate mortgage loan to a more predictable fixed-rate loan.
  • In most cases, however, the primary goal for refinancing an FHA or conventional loan is to secure a lower mortgage rate, and therefore save money over the long term.

You can refinance an FHA loan just as you would a conventional mortgage product. (By way of definition, a “conventional” home loan is one that is not guaranteed or insured by the government. This makes it different from the Federal Housing Administration program, which does provide government insurance to participating mortgage lenders.)

In order to refinance an FHA loan, you will need to meet the lender’s minimum requirements. These criteria can vary from one bank or mortgage company to the next. For instance, you might need to have a certain level of equity in your home, or a certain credit score to qualify for FHA refinancing. Again, this can vary by lender.

Earlier, I mentioned the streamline refinancing option available to borrowers who use an FHA loan to buy a house. Let’s talk more about that.

Advantages of “Streamline” Refinancing

To revisit the question at hand: Can I refinance my FHA loan? The short answer is yes, as long as you meet all of the lender’s requirements. In fact, it might be easier than refinancing a regular mortgage, due to a special program offered by the Department of Housing and Urban Development. This program is known as a streamline refinance.

As explained on the HUD website, streamline refinancing can be used for an existing FHA-insured mortgage loan, and it usually requires less documentation and underwriting. In fact, you might be able to skip the home appraisal process as well, which is almost always required on a regular or conventional refinance loan.

But it’s important to realize that you could still encounter closing costs, even when using a streamlined FHA refinance. This is a common misconception among homeowners. The term “streamline” refers to the fact that there is usually less paperwork involved – it doesn’t refer to a reduction or elimination of closing costs.

The basic requirements* for an FHA streamline refinance are:

  • The home loan you are trying to refinance must be FHA-insured.
  • You must be current on your payments (i.e., not behind or delinquent).
  • You must receive a “net tangible benefit” from refinancing. This means it must work out to your advantage in some way, such as saving you money over time.

* These criteria were adapted from official HUD guidelines. Refer to HUD.gov for more.

This article answers the question: Can an FHA home loan be refinanced later on down the road? If you would like to learn more about this program, please refer to our article library or visit the official HUD website.