Like many American homeowners, your first mortgage could be a Federal Housing Administration (FHA) loan. FHA-supported loans are attractive for first-time homebuyers, because FHA loans make it easier to get financing by requiring only minimal down payments and reliable credit assessments. Can I refinance FHA loan?
Can you refinance an FHA loan?
You can refinance an FHA loan into a conventional loan, but it requires you to meet the minimum requirements. FHA refinancing is particularly beneficial if you have 20% equity in your home and you can remove lifetime private mortgage insurance (PMI). If you do not reach the minimum equity level for a traditional loan, you will also have to take into account the continuous costs of private mortgage insurance (PMI) until you reach 78% loan-to-value ratio.
Improving FHA refinancing
This refinancing option is considered streamlined because it allows you to quickly and often lower the interest rate on your current unrated housing loan. FHA Streamline Refinance also reduces the amount of formalities that the lender must complete, saving valuable time and money.
Your current mortgage must already be insured by FHA
Although it is possible to refinance a conventional loan into an FHA loan, the Streamline option is only available to borrowers with an FHA loan.
- The mortgage must be current. This means that you have not missed any payments. You must have at least 6 monthly payments and have an existing mortgage for at least 210 days before you can apply for the Streamline Refinance option.
- There must be a measurable net benefit. FHA actually requires some benefit for the borrower if they benefit from improved refinancing.
FHA Improve refinancing rates
Today’s average 30-year FHA rate is 2.75% (3.73% APRC). Remember, however, that there is a FHA mortgage insurance fee that adds 0.85% of the annual interest. This also applies to improving refinancing. So if you’re thinking about improving FHA refinancing, now is a good time to capture a base rate of less than 4% and see greater savings throughout the loan period.
Qualification to FHA Rehab Refinance
Your home must be at least one year old, and its rehabilitation cost must be at least USD 5,000. The value of the property must comply with the FHA mortgage limit for the area of residence. FHA allows the value of the property as the smaller of: the sum of the value of the house before rehabilitation plus the cost of rehabilitation or 110 percent of the estimated value of the house after rehabilitation.
Look around for the best deal
If you are not sure whether conventional or FHA refinancing is the best, look at what the lender offers. By weighing mortgage costs and adding closing costs, you can find out which option will save you the most money.
If you need additional help making this decision and other financial health related issues, you may want to consider hiring a financial advisor.