FHA refinance rates

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An FHA refinance is the process of replacing your current mortgage with a new loan. This might mean swapping an existing FHA loan for another FHA loan or another type of mortgage, or switching a non-FHA loan to an FHA loan. Ideally, the refinance gets you a lower interest rate, shorter loan term or both. You can also refinance to take cash out of your equity.

To qualify for an FHA refinance, you'll generally need to meet these requirements:

• A minimum 580 credit score in most cases 
• At least 20 percent equity
• Be in good standing with your current FHA loan payments
• Have had your FHA loan for at least six months
• Have a satisfactory appraisal

Note: If you're looking to do an FHA streamline refinance, you won't need to meet all of these requirements. However, the streamline refinance has to have a “net tangible benefit,” such as lowering your rate.

The cost of an FHA refinance depends on a variety of factors, including any lender or third-party costs, such as a loan origination fee or appraisal fee. You'll also have to pay the upfront mortgage insurance premium unique to FHA loans.

Refinancing an FHA loan can temporarily hurt your credit score for a few reasons. For one, any credit pull lowers your score a bit. When you shop around for an FHA refinance loan, get rate quotes within a 45-day window to minimize the hit to your score. Secondly, a refinance is a new loan that pays off the old one. That means it’ll go on your credit report and impact the length of your credit history, which factors into your score. If the new loan is bigger because you took cash out, that also increases your debt load and affects your score.

All FHA loans, including FHA refinances, require the borrower to pay mortgage insurance premiums. For an FHA streamline refinance, this includes an upfront premium of 1.75 percent of the loan amount plus an annual premium of 0.55 percent. Depending on your loan-to-value (LTV) ratio, you’ll pay this annual premium for the entire loan term or 11 years.