Due to the economic impact of COVID-19, the federal government has cut interest rates. These cuts affect various types of mortgages differently, and have also driven a spike in demand, putting pressure on lenders and their staff. As a result, at times, you may see no rates on our site, or you may see higher rates on government-backed mortgages like FHA loan refinancing, as lenders tighten credit standards amid economic uncertainty. Learn more about the coronavirus’ impact on mortgage rates.
The table below brings together a comprehensive national survey of mortgage lenders to help you know what are the most competitive FHA refinance rates. This interest rate table is updated daily to give you the most current rates when choosing an FHA refinance home loan.
|30-Year FHA Rate||2.970%||3.540%|
|30-Year Fixed Rate||3.140%||3.410%|
|20-Year Fixed Rate||3.170%||3.390%|
|15-Year Fixed Rate||2.730%||3.020%|
|10/1 ARM Rate||3.380%||3.830%|
|7/1 ARM Rate||3.160%||3.790%|
|5/1 ARM Rate||3.080%||3.860%|
|30-Year VA Rate||2.980%||3.130%|
|30-Year Fixed Jumbo Rate||3.190%||3.260%|
|15-Year Fixed Jumbo Rate||2.800%||2.850%|
|7/1 ARM Jumbo Rate||3.190%||3.680%|
|5/1 ARM Jumbo Rate||2.980%||3.590%|
Rates as of July 13th, 2020 at 6:30 AM
FHA is short for Federal Housing Administration and is part of the U.S. Department of Housing and Urban Development. This loan category began in the 1930s to boost home sales. The U.S. government doesn’t make the loans, but it does insure them.
“The program was created for low- to moderate-income first-time homebuyers that have less established credit and are interested in lower down payment options,” explains Robert Heck, head of origination at Morty, a mortgage technology platform. You’ll probably want to monitor FHA refinance rates since they fluctuate over time.
FHA refinance rates and loans are only available to those who put down less than 20 percent for their down payment. (Borrowers, however, can put down as little as 3.5 percent.) As a result, all FHA mortgage holders are required to pay into the FHA-run mortgage insurance fund. “This requires an up-front payment that can be financed into the loan amount as well as monthly insurance payments,” Heck says. “The amounts required vary upon down payment percentage.”
There are several variables to consider when you’re deciding between 20-year or 30-year conventional mortgage rates and FHA refinance rates. Both kinds offer fixed and variable- rate mortgages, and interest rates can vary based on your lender, your credit score and the market. Regardless of what loan option you choose, it’s important to include all of the expenses associated with your mortgage (HOA fees, mortgage insurance and homeowners insurance) to determine what fits comfortably in your budget.
The availability of FHA refinance rates today can be good news for borrowers who think they can’t qualify for a loan. “Borrowers that have lower or less-established credit, as well as individuals looking to put less down, benefit the most from FHA loans, (as) 3.5 percent is the minimum down payment,” Heck explains. “But down payment assistance programs are allowed and can help reduce total closing costs further.”
FHA refinance loans can be open to those with poor credit, including people with a FICO credit score as low as 500, depending on the type of transaction. “The biggest restriction for FHA loans is the maximum loan amount, which is calculated based upon median home prices,” says Heck.
If you’re looking to refinance, you’ll probably come across the FHA streamline refinance and rate-and-term refinancing and will want to understand them before deciding what’s right for you. “FHA streamline is a form of a limited cash-out, which is the same as a rate-and-term refinance,” Heck explains.
If you’re eligible for these mortgage products, you may qualify for reduced income and credit documentation requirements, as well as reduced or waived appraisal requirements.
“You also may be able to reduce the monthly MIP (mortgage insurance premium) you pay,” Heck says. “This all leads to a quicker and easier streamlined process, which should reduce closing costs and headache that is typically associated with the mortgage qualification process.” It’s also important to note that for an FHA streamline refinance, the original loan must also have been an FHA loan.
FHA refinance loans are attractive for many reasons. They can often mean lower interest costs and lower monthly payments and potentially lower monthly mortgage insurance payments.
When it comes to doing an FHA refinance, all loans require the borrower to pay the mortgage insurance premium (MIP), even if you’ve already paid more than 80 percent of your home’s value.
“Refinancing restarts this clock and extends the time you must pay mortgage insurance vs. when you would potentially be able to get rid of these payments with your original mortgage,” explains Heck. “You may need to pay up-front MIP again depending on when your first FHA loan closed, which increases your total interest/finance charge costs.”
A simple or no cash-out FHA refinance is one where all proceeds of a new FHA loan go only toward paying off an existing FHA loan and the costs of the transaction. The borrower refinances only the principal balance or possibly less.
By contrast, in a cash-out FHA refinance, borrowers are taking advantage of their option to receive cash, as they’ve paid down a substantial portion of their mortgages. Keep in mind that lenders will require a higher credit score for a cash-out refi, at least 600 to 660 and maybe more. The maximum loan-to-value for an FHA cash out loan is 80 percent of the current appraised value.
An FHA streamline refinance is just what it sounds like: a relatively easy path to replacing an existing FHA loan with another--to reduce your interest rate and your monthly payment. These loans involve reduced paperwork and simplified requirements. They allow borrowers to skip credit checks, but you’ll need to have made your mortgage payment on time over the preceding 12 months. There’s no requirement for income verification or a recalculation of your debt-to-income ratio.
If you’ve proven you’re a good credit risk for your existing FHA loan, there’s no requirement for a new debt-to-income ratio calculation. Under the FHA streamline program, your new loan can't exceed the original amount borrowed. An appraisal might be required, depending on existing equity and the loan balance. If the property has appreciated sufficiently, it might make sense to seek an reappraisal if you want to qualify for a higher amount, perhaps to pay for improvements. But the maximum cash you can get is usually $500.
How much you stand to save with an FHA refinance and how much it can cost depends on a variety of factors, including current FHA refinance rates and what kind of product you choose.
“Refinancing into a lower interest rate and shorter-term product will help you save on interest costs over the life of the loan,” Heck says, though it may not lower your monthly payments. He adds that if lowering monthly payments is the goal with a refi, it’s usually “most beneficial to do so in the first three to five years” from when you took out the original loan and restart the clock with a similar length of term. The reason: interest charges are front-loaded into the early years of a mortgage, so you avoid the risk of paying a lot more in interest if you, say, refinance into another 30-year mortgage that only has 20 years left.
You’ll also want to evaluate the required mortgage insurance—both monthly and over the life of the loan—since that can be a significant expense. Closing costs are another factor and will vary according to your lender.
Regarding timing, it’s smart to shop FHA refinance rates and how they trend over time. It’s always important to shop around to find a lender that suits your needs. This can mean banks or non-banks, which handle the majority of FHA loans.
One downside of an FHA refinance loan is that all FHA loans require mortgage insurance, meaning a costly mortgage insurance premium paid by borrowers. By contrast, conventional loans only require insurance, known as private mortgage insurance (PMI), if the down payment is less than 20% of the property's purchase.
Each FHA loan requires both an upfront premium of 1.75 percent of the loan amount plus an annual premium of 0.45 percent to 1.05 percent. Exact when these costs lapse is determined by the term of the loan, amount borrowed and the loan-to-value ratio.
These premiums can add significantly to the costs of the loan--and your monthly payment. If you’re already paying PMI on your mortgage, this might not be as big a deal, depending on the relative costs, because you’re replacing one premium with another. But if you paid 20 percent down on your existing mortgage and thus pay no insurance premiums--or you’ve built up enough equity to get your lender to cease to require these premiums--this FHA requirement could give you pause and prompt you to consider other financing avenues to avoid this cost.
|Loan Type||Purchase Rates||Refinance Rates|
|The table above links out to loan-specific content to help you learn more about rates by loan type.|
|30-Year Loan||30-Year Mortgage Rates||30-Year Refinance Rates|
|20-Year Loan||20-Year Mortgage Rates||20-Year Refinance Rates|
|15-Year Loan||15-Year Mortgage Rates||15-Year Refinance Rates|
|10-Year Loan||10-Year Mortgage Rates||10-Year Refinance Rates|
|FHA Loan||FHA Mortgage Rates||FHA Refinance Rates|
|VA Loan||VA Mortgage Rates||VA Refinance Rates|
|ARM Loan||ARM Mortgage Rates||ARM Refinance Rates|
|Jumbo Loan||Jumbo Mortgage Rates||Jumbo Refinance Rates|